Question 4 Question 4a, b, c and d are mutually exclusive and independent of each other. Answer each part according to the given scenario. Question 4a Kiwi Pte Ltd (KPL) acquired the trademark of a product from Company A for $200,000. The trademark can still be used for 4 years before renewal and the trademark is renewable every 15 years at insignificant cost. KPL intends to renew the trademark continuously and evidence supports its ability to do so. From the market survey of its product life cycle, market and environment trends, the product will generate net cash inflows for an indefinite period. Explain and show how the trademark should be accounted for under the relevant accounting standards. (7 marks) Question 4b Tim Bakery previously calculated depreciation on its baking equipment using the straight- line method @ 10%. However, in light of significant reduction of revenue generated in the past 18 months, the management has decided to depreciate the baking equipment by using the reducing balance method @ 20% which shall more accurately reflect the allocation of the expenses of the baking equipment over the useful life. Explain and recommend how the change should be accounted for under the relevant accounting standard. (7 marks) Question 4c Audio Quest Enterprise (AQE) sells handmade hifi audio amplifiers and gives a year's warranty with all amplifiers sold during the year. Sales for the year amounted to $1 million. Past experience shows that AQE needs to do no repairs on 90% of the amplifiers. On average, 8% need minor repairs, and 2% need major repairs. AQE has calculated that if minor repairs were needed on all amplifiers, it would cost $60,000 and major repairs on all amplifiers would cost $150,000. Examine and explain how AQE should account for the warranty of the amplifiers under the relevant accounting standard. (7 marks)