On 1 January 2015, Telupid Bhd acquired a fabric design from a well-known fashion designer at RM2,000,000. The company h
Posted: Sun Jul 03, 2022 4:12 pm
On 1 January 2015, Telupid Bhd acquired a fabric design from awell-known fashion designer at RM2,000,000. The company hadconducted a thorough product life-cycle analysis, and the resultsindicated that the design would be trending for the next 20years.
On 1 January 2020, due to unexpected changes in the fashionindustry, the design that was initially estimated to have a totaluseful life of 20 years was revised to 10 years. As a result, thevalue-in-use was estimated to be RM900,000 on that date.
In January 2022, the company incurred additional costs ofRM1,500,000 to improve the old design and the improvement allowsthe useful life of the design to be extended for another 3years.
The company adopts the cost model for the intangible assets andthe property plant and equipment. The depreciation and amortisationexpenses are calculated on a straight-line method and charged toprofit or loss on a yearly basis. The company closes its account on31 December every year.
Required:
Discuss whether the fabric design acquired on 1 January 2015 tobe treated under MFRS 116 Property, Plant andEquipment or MFRS 138 Intangible Assets.
(4 marks)
Explain the appropriate accounting treatment to account for therevision of the useful life of the design and the value-in-use ofRM900,000 on 1 January 2020. Prepare relevant journal entries forthe year ended 31 December 2020.
(7 marks)
Explain the appropriate accounting treatment for the additionalcost incurred to improve the old design for the year ended 31December 2022.
(5 marks)
Prepare an extract statement of financial position and statementof profit or loss and other comprehensive income for the year ended31 December 2022 to reflect all the transactions related to thefabric design.
(4 marks) (Total: 20 marks)
On 1 January 2020, due to unexpected changes in the fashionindustry, the design that was initially estimated to have a totaluseful life of 20 years was revised to 10 years. As a result, thevalue-in-use was estimated to be RM900,000 on that date.
In January 2022, the company incurred additional costs ofRM1,500,000 to improve the old design and the improvement allowsthe useful life of the design to be extended for another 3years.
The company adopts the cost model for the intangible assets andthe property plant and equipment. The depreciation and amortisationexpenses are calculated on a straight-line method and charged toprofit or loss on a yearly basis. The company closes its account on31 December every year.
Required:
Discuss whether the fabric design acquired on 1 January 2015 tobe treated under MFRS 116 Property, Plant andEquipment or MFRS 138 Intangible Assets.
(4 marks)
Explain the appropriate accounting treatment to account for therevision of the useful life of the design and the value-in-use ofRM900,000 on 1 January 2020. Prepare relevant journal entries forthe year ended 31 December 2020.
(7 marks)
Explain the appropriate accounting treatment for the additionalcost incurred to improve the old design for the year ended 31December 2022.
(5 marks)
Prepare an extract statement of financial position and statementof profit or loss and other comprehensive income for the year ended31 December 2022 to reflect all the transactions related to thefabric design.
(4 marks) (Total: 20 marks)