Question

•During 2020, High Tech Corp spent the following to develop a COVID 19 vaccine.

•Labor   $900,000

•Lab supplies    300,000

•Clinical trials     500,000

•Patent filing fees       15,000

•High Tech Corp also purchased a COVID 19 test patent from Rapid Dev Company on July 1, 2020 for $2,250,000.

•How much will High Tech Corp capitalize as intangible asset-patent in 2020?  DO NOT USE $ SIGN, COMMA OR PENNIES

Answer 1

Answer :-

As per IAS 38 (Intangible Assets) The following development costs will be capitalised

Particulars	Amount
Labor	900000
Lab Supplies	300000
Clinical Trials	0 (because research costs are to be charged to expense)
Patent Filing Fees	15000
Patent Acquired	2250000
TOTAL PATENT COST TO BE CAPITALISED	3465000

Reasoning

As per IAS 38

a. All research cost has to be charged to expense.

b. All developmental cost are to be capitalised after commercial viablity of the patent is established.(THIS HAS BEEN ASSUMED)