QUESTION 1

As a distributor, SH Bhd has to make sure that healthcare provider prescribes gets to the right hospital, pharmacy or other healthcare facility safely, securely and reliably. Thus, for the past 10 months, SH Bhd has been conducting a research in developing a revolutionary new system to enhance the efficiency of its existing distribution system. SH Bhd believes this project will be a successful one and there are a few distributors companies who also show their interest to buy this system. The cost to patent this system when its ready is estimated at RM70,000. So far, SH Bhd has incurred RM175,000 to finance this project. However, as of companys year-end (31 December), this new system has not been marketed. This is due to an error which requires substantial amount of work by the researchers to fix the problem

REQUIRED:

Explain the accounting treatment for the cost incurred by SH Bhd to develop new distribution system in accordance to MFRS 138 Intangible Assets. Prepare the journal entry to record the transaction for SH Bhd.