Question

QUESTION 2

Wajidah Bhd has the following amounts reported in its general ledger at 31 December 2019.

Organization costs	RM24,000
Trademarks	RM20,000
Bonds Payable	RM35,000
Cost of equipment acquired for R&D projects; the equipment has an alternative future use	RM90,000
Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years (all research phase)	RM70,000

REQUIRED:

1. On the basis of the information above, compute the total amount to be reported by Wajidah for intangible assets on its statement of financial position at 31 December 2019. As noted, the equipment has alternative future use.

2. If an item is not to be included in intangible assets, explain its proper treatment for reporting purposes

Answer 1

a.

Trademarks	20,000.00
Total intangible assets	20,000.00

b.

Organization costs	24,000.00	This Should be Expensed
Bonds payable	35,000.00	This Should be Shown as Bonds Payable in Long Term liabilities Section
Cost of equipment acquired for R&D projects; the equipment has an alternative future use	90,000.00	This Should be Reported with Property plant and Equipment as it has an Alternative use also
Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years (all research phase)	70,000.00	This Should be Expensed as Research and Development Expenses in the Income Statement