Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks....
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Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks. Some drinks are developed internally, whilst other brands are purchased. The following information is relevant to the business for the year ended 30 May 2022. TopFlip is a revolutionary tyre of can which has been developed internally by Thirsty over the past two years. The can has a re-saleable top which allows the can to be sealed after opening to prevent the gas escaping. In January 2021 the idea for this new product was launched, and a loan of R5 000 000 was obtained from Borrow Bank in order to finance this project. The chronology of its development and associated costs for the year ended 31 May 2022 are as shown in the following table: Date Nature of activity 01/06/2021- 31/07/2021 01/08/2021- 15/09/2021 30/09/2021 Evaluation of a number of alternative prototypes and designs A design is chosen and engineers produce a plan which indicates that it is technically possible to produce the TopFlip can. 1/10/2021-31/01/2022 Design and construction of a pilot Market surveys to establish whether or not consumers would want such a can 01/02/2021- 31/05/2022 manufacturing plant Test of a pilot manufacturing plant Expenditure 40 000 200 000 1 100 000 600 000 All expenditure incurred has been confirmed by the accounting department. Thirsty has applied to register the TopFlip can as a patent. Required: Discuss, with reference to IAS 38: Intangible Assets, the correct accounting treatment for all the costs incurred in relation to the TopFlip can for the year ended 31 May 2022 Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks. Some drinks are developed internally, whilst other brands are purchased. The following information is relevant to the business for the year ended 30 May 2022. TopFlip is a revolutionary tyre of can which has been developed internally by Thirsty over the past two years. The can has a re-saleable top which allows the can to be sealed after opening to prevent the gas escaping. In January 2021 the idea for this new product was launched, and a loan of R5 000 000 was obtained from Borrow Bank in order to finance this project. The chronology of its development and associated costs for the year ended 31 May 2022 are as shown in the following table: Date Nature of activity 01/06/2021- 31/07/2021 01/08/2021- 15/09/2021 30/09/2021 Evaluation of a number of alternative prototypes and designs A design is chosen and engineers produce a plan which indicates that it is technically possible to produce the TopFlip can. 1/10/2021-31/01/2022 Design and construction of a pilot Market surveys to establish whether or not consumers would want such a can 01/02/2021- 31/05/2022 manufacturing plant Test of a pilot manufacturing plant Expenditure 40 000 200 000 1 100 000 600 000 All expenditure incurred has been confirmed by the accounting department. Thirsty has applied to register the TopFlip can as a patent. Required: Discuss, with reference to IAS 38: Intangible Assets, the correct accounting treatment for all the costs incurred in relation to the TopFlip can for the year ended 31 May 2022 Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks. Some drinks are developed internally, whilst other brands are purchased. The following information is relevant to the business for the year ended 30 May 2022. TopFlip is a revolutionary tyre of can which has been developed internally by Thirsty over the past two years. The can has a re-saleable top which allows the can to be sealed after opening to prevent the gas escaping. In January 2021 the idea for this new product was launched, and a loan of R5 000 000 was obtained from Borrow Bank in order to finance this project. The chronology of its development and associated costs for the year ended 31 May 2022 are as shown in the following table: Date Nature of activity 01/06/2021- 31/07/2021 01/08/2021- 15/09/2021 30/09/2021 Evaluation of a number of alternative prototypes and designs A design is chosen and engineers produce a plan which indicates that it is technically possible to produce the TopFlip can. 1/10/2021-31/01/2022 Design and construction of a pilot Market surveys to establish whether or not consumers would want such a can 01/02/2021- 31/05/2022 manufacturing plant Test of a pilot manufacturing plant Expenditure 40 000 200 000 1 100 000 600 000 All expenditure incurred has been confirmed by the accounting department. Thirsty has applied to register the TopFlip can as a patent. Required: Discuss, with reference to IAS 38: Intangible Assets, the correct accounting treatment for all the costs incurred in relation to the TopFlip can for the year ended 31 May 2022 Thirsty Limited's business involves the bottling and distribution of a wide variety of carbonated soft drinks. Some drinks are developed internally, whilst other brands are purchased. The following information is relevant to the business for the year ended 30 May 2022. TopFlip is a revolutionary tyre of can which has been developed internally by Thirsty over the past two years. The can has a re-saleable top which allows the can to be sealed after opening to prevent the gas escaping. In January 2021 the idea for this new product was launched, and a loan of R5 000 000 was obtained from Borrow Bank in order to finance this project. The chronology of its development and associated costs for the year ended 31 May 2022 are as shown in the following table: Date Nature of activity 01/06/2021- 31/07/2021 01/08/2021- 15/09/2021 30/09/2021 Evaluation of a number of alternative prototypes and designs A design is chosen and engineers produce a plan which indicates that it is technically possible to produce the TopFlip can. 1/10/2021-31/01/2022 Design and construction of a pilot Market surveys to establish whether or not consumers would want such a can 01/02/2021- 31/05/2022 manufacturing plant Test of a pilot manufacturing plant Expenditure 40 000 200 000 1 100 000 600 000 All expenditure incurred has been confirmed by the accounting department. Thirsty has applied to register the TopFlip can as a patent. Required: Discuss, with reference to IAS 38: Intangible Assets, the correct accounting treatment for all the costs incurred in relation to the TopFlip can for the year ended 31 May 2022
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Related Book For
Intermediate Accounting
ISBN: 978-0134730370
2nd edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
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