• On 1 January 2011 Khumalo Ltd acquired a patent for R250, 000. On 31 December 2011 management assessed the patent’s useful life at 15 years from the date of acquisition. Management assessed that the entity will consume the patent’s future economic benefits evenly over the 15 years from the date of acquisition and completed a survey and is probable the patent can be bought for R35 000 at the end of the 15 years. On 31 December 2015, the company realized that the assessment of the useful life of the patent from the acquisition was wrong, it was supposed to be 11 years. The active market for the patent is no longer probable but possible at the end of the patent’s useful life. The recoverable amount of the patent on 31 December 2015 is R130 000.
•  REQUIRED: 
• 5.1 When will an entity assume the residual value of an intangible asset not to be zero? 
• 5.2 How much will the patent be disclosed on the face of the Statement of financial position on 31 December 2014 and 2015?

Answer rating: 100% (QA)

1 An entity will assume the residual value at the end of its useful life This is a time when there i... View the full answer