Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 9, Problem 11E
Calculating the Impact of Estimated Useful Lives of Intangible Assets
Refer to the data in E9-10. Assume each company spent $319,800 at the beginning of the current year for additional Developed Technology. Because of its proprietary nature, the technology is estimated to have no residual value at the end of its estimated life.
Required:
Calculate the impact (direction and amount) that the amortization of such expenditures would have on each company’s Income from Operations in the current year.
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Assume REH AG, a hypothetical company, incurs expenditures of €1,000 per monthduring the fiscal year ended 31 December 2009 to develop software for internal use.Under IFRS, the company must treat the expenditures as an expense until the softwaremeets the criteria for recognition as an intangible asset, after which time the expenditurescan be capitalized as an intangible asset.1. What is the accounting impact of the company being able to demonstrate that thesoftware met the criteria for recognition as an intangible asset on 1 February versus1 December?2. How would the treatment of expenditures diff er if the company reported under U.S.GAAP and it had established in 2008 that the project was likely to be completed?
Inspector Gadget Ltd has a policy of writing off development expenditure to the Income
Statement as was incurred. In preparing its financial statements for the year 20X7 it became
aware that under IFRS rules qualifying expenditure should be treated as an intangible asset.
Below is the qualifying expenditure for the company:
Year ended 30 Sep 20X4
Year ended 30 Sep 20X5
Year ended 30 Sep 20X6
Year ended 30 Sep 20X7
$'000
300
240
800
400
All capitalized expenditure is deemed to having a four year life. Assume that amortization
starts at the beginning of the accounting period following capitalization. Inspector Gadget
Ltd has no development expenditure before that for the year ended 30 September 20X4.
Required:
b. Treating the above as the correction of an error in applying an accounting policy,
calculate the amounts that should appear in the income statement and statement of
financial position (including comparative figures) and statement of changes in equity
of the company inb respect…
Which of the following formulas for the capital expenditure on intangibles is correct? Assume the current time (now) is t1
and last year is to, and that 'Intangible assets' is a carrying value net of accumulated amortisation.
Select one:
a. CapExOnIntangibles(t1) = IntangibleAssets (t1) + IntangibleAssets (t0) + Amortisation ExpenseOnIntanglibles (t1)
b. CapExOnIntangibles(t1) = IntangibleAssets (t1) - IntangibleAssets(t0) + Amortisation ExpenseOnIntanglibles(t1)
c. CapExOnIntangibles (t1) = IntangibleAssets(t1) - IntangibleAssets(t0) - Amortisation ExpenseOnIntanglibles (t1)
d. CapExOnIntangibles(t1) = IntangibleAssets (t1) + AmortisationExpenseOnIntanglibles (t1)
e. CapExOnIntangibles (t1) = IntangibleAssets (t1) - Amortisation ExpenseOnIntanglibles (t1)
Chapter 9 Solutions
Fundamentals Of Financial Accounting
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