XKay2 Bhd is a producer of healthcare and skincare products that has been operating for more than 10 years. The company is actively involved in research and development (R&D) activities in order to improve product quality. The following are transactions related to intangibles: 1. On 1 January 2020, a patent related to the anti-ageing formula was acquired at a cost of RM150,000. The patent is subsequently measured using a cost model and amortized on a straight-line basis over 5 years. On 30 June 2021, the management decided to sell the patent to Bodishok Bhd for RM200,000. 2. On 1 January 2019, a trademark relating to an anti-ageing product line was acquired at a cost of RM140,000. The trademark with indefinite ife is subsequently measured using the revaluation model. There was no changes in the value as at 31 December 2019. However, the trademark was revalued downwards to RM120,000 on 31 December 2020 and to RM110,000 on 31 December 2021. 3. On 1 January 2021, XKay2 Bhd was doing research to find formula for a new anti-ageing product for Asian women. From the beginning of research until 31 May 2021 the company had spent RM1,580,000. However, none of the formulae was useful. In December, the technical teams developed a prototype named Melasma 0 and incurred a cost of RM1,000,000 which inclusive of RM50,000 of administrative staff salaries. After some dinical trials to few Asian women it was proven successful and the prototype will be commercialized in 2022. 4. On 1 January 2019, the company paid RM15,000,000 to acquire the business of Bioteng. The net identifiable assets acquired include a Brand which has a fair value of RM3,000,000 at the date of acquisition. In 2020, due to adverse press reports, the Brand is deemed to have a recoverable amount of RM1,000,000. However, in 2021 the press reports were subsequently found to be untrue, and the recoverable amount of the Brand increased to RM2.500.000. Required: 1. Prepare joumal entries for the financial year ended 31 December 2021, including journal entries for amortization if applicabie (Present all relevant workings) 2. Prepare an extract of the Statement of Financial Position of XKay2 Bhd as at 31 December 2021 to present the intangibles (Assumption: There is no other transaction involving intangble assets except those mentioned in the Notes above) 11

XKay2 Bhd is a producer of healthcare and skincare products that has been operating for more than 10 years. The company is actively involved in research and development (R&D) activities in order to improve product quality. The following are transactions related to intangibles: 1. On 1 January 2020, a patent related to the anti-ageing formula was acquired at a cost of RM150,000. The patent is subsequently measured using a cost model and amortized on a straight-line basis over 5 years. On 30 June 2021, the management decided to sell the patent to Bodishok Bhd for RM200,000. 2. On 1 January 2019, a trademark relating to an anti-ageing product line was acquired at a cost of RM140,000. The trademark with indefinite ife is subsequently measured using the revaluation model. There was no changes in the value as at 31 December 2019. However, the trademark was revalued downwards to RM120,000 on 31 December 2020 and to RM110,000 on 31 December 2021. 3. On 1 January 2021, XKay2 Bhd was doing research to find formula for a new anti-ageing product for Asian women. From the beginning of research until 31 May 2021 the company had spent RM1,580,000. However, none of the formulae was useful. In December, the technical teams developed a prototype named Melasma 0 and incurred a cost of RM1,000,000 which inclusive of RM50,000 of administrative staff salaries. After some dinical trials to few Asian women it was proven successful and the prototype will be commercialized in 2022. 4. On 1 January 2019, the company paid RM15,000,000 to acquire the business of Bioteng. The net identifiable assets acquired include a Brand which has a fair value of RM3,000,000 at the date of acquisition. In 2020, due to adverse press reports, the Brand is deemed to have a recoverable amount of RM1,000,000. However, in 2021 the press reports were subsequently found to be untrue, and the recoverable amount of the Brand increased to RM2.500.000. Required: 1. Prepare joumal entries for the financial year ended 31 December 2021, including journal entries for amortization if applicabie (Present all relevant workings) 2. Prepare an extract of the Statement of Financial Position of XKay2 Bhd as at 31 December 2021 to present the intangibles (Assumption: There is no other transaction involving intangble assets except those mentioned in the Notes above) 11

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Transcribed Image Text:XKay2 Bhd is a producer of healthcare and skincare products that has been operating for more than 10 years. The company is actively involved in research and development (R&D) activities in order to improve product quality. The following are transactions related to intangibles: 1. On 1 January 2020, a patent related to the anti-ageing formula was acquired at a cost of RM150,000. The patent is subsequently measured using a cost model and amortized on a straight-line basis over 5 years. On 30 June 2021, the management decided to sell the patent to Bodishok Bhd for RM200,000. 2. On 1 January 2019, a trademark relating to an anti-ageing product line was acquired at a cost of RM140,000. The trademark with indefinite ife is subsequently measured using the revaluation model. There was no changes in the value as at 31 December 2019. However, the trademark was revalued downwards to RM120,000 on 31 December 2020 and to RM110,000 on 31 December 2021. 3. On 1 January 2021, XKay2 Bhd was doing research to find formula for a new anti-ageing product for Asian women. From the beginning of research until 31 May 2021 the company had spent RM1,580,000. However, none of the formulae was useful. In December, the technical teams developed a prototype named Melasma 0 and incurred a cost of RM1,000,000 which inclusive of RM50,000 of administrative staff salaries. After some dinical trials to few Asian women it was proven successful and the prototype will be commercialized in 2022. 4. On 1 January 2019, the company paid RM15,000,000 to acquire the business of Bioteng. The net identifiable assets acquired include a Brand which has a fair value of RM3,000,000 at the date of acquisition. In 2020, due to adverse press reports, the Brand is deemed to have a recoverable amount of RM1,000,000. However, in 2021 the press reports were subsequently found to be untrue, and the recoverable amount of the Brand increased to RM2.500.000. Required: 1. Prepare joumal entries for the financial year ended 31 December 2021, including journal entries for amortization if applicabie (Present all relevant workings) 2. Prepare an extract of the Statement of Financial Position of XKay2 Bhd as at 31 December 2021 to present the intangibles (Assumption: There is no other transaction involving intangble assets except those mentioned in the Notes above) 11

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