In January 2016, WIN CUP BHD research and development team embarked into a new project. The...
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In January 2016, WIN CUP BHD research and development team embarked into a new project. The team came up with new product, named 'slush cup' which can maintain the coldest of a drink for 24 hours. They had incurred RM250,000 for the research activities. The researchers were able to demonstrate the technical feasibility to complete and sell the product in January 2017. In total WIN CUP BHD had incurred RM440,000 for the development activities including RM17,000 for the staff training in 2017. Commercial production commenced on 1 January 2018, and the product is expected to bring economic benefits for 6 years. Amortization of development costs is on straight line basis on yearly basis. Unfortunately, on 31 December 2020, a rival came up with a cheaper substitute product. The revise present value of future expected cash flows declined to RM125,000. REQUIRED: i. Explain the accounting treatment for the year ended 31 December 2016, 31 December 2017 and 31 December 2018 for the costs of research and development activities incurred above. ii. Calculate the impairment loss (if any) for the year ended 31 December 2020. iii. Prepare the journal entries to record the above impairment loss (if any). In January 2016, WIN CUP BHD research and development team embarked into a new project. The team came up with new product, named 'slush cup' which can maintain the coldest of a drink for 24 hours. They had incurred RM250,000 for the research activities. The researchers were able to demonstrate the technical feasibility to complete and sell the product in January 2017. In total WIN CUP BHD had incurred RM440,000 for the development activities including RM17,000 for the staff training in 2017. Commercial production commenced on 1 January 2018, and the product is expected to bring economic benefits for 6 years. Amortization of development costs is on straight line basis on yearly basis. Unfortunately, on 31 December 2020, a rival came up with a cheaper substitute product. The revise present value of future expected cash flows declined to RM125,000. REQUIRED: i. Explain the accounting treatment for the year ended 31 December 2016, 31 December 2017 and 31 December 2018 for the costs of research and development activities incurred above. ii. Calculate the impairment loss (if any) for the year ended 31 December 2020. iii. Prepare the journal entries to record the above impairment loss (if any).
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1 December 2016 RM250000 expense December 2017 RM423000 capitalized as intangible asset RM ... View the full answer
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