Buy-N-Buy Bhd (BNB) is an e-business that was established on 1 July 2017 and has recently listed on main board of Bursa Malaysia. The company closes its accounts on 30 June each year and the schedule below is a partial statement of financial position of the company as at the financial year-end 2019. RM Patent 600,000 Accumulated amortization - Patent (240,000) Accumulated impairment loss - Patent (50,000) Additional information: On 1 December 2019, BNB purchased an online sales order control computer package for RM100,000 from Ercel-Com. Included in the purchase price is a maintenance service of 3 years for RM3,000 each year. BNB employed the services of a consultant to install and test the software for RM2,000. On 30 June 2020, BNB determines the present value of cash flows expected from the use of the patent to be RM250,000 and the fair values less cost to sell will be RM245,000. The useful life of the patent following the impairment test on 30 June 2019 is 4 years. Amortisation is recognised on a straight-line basis over the estimated useful lives of intangible assets of 5 years from the date that they are available for use. REQUIRED: Prepare the journal entries related to the intangible assets for the financial year 2020. Show all the workings.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Buy-N-Buy Bhd (BNB) is an e-business that was established on 1 July 2017 and has recently listed on main board of Bursa Malaysia. The company closes its accounts on 30 June each year and the schedule below is a partial statement of financial position of the company as at the financial year-end 2019.

	RM
Patent	600,000
Accumulated amortization - Patent	(240,000)
Accumulated impairment loss - Patent	(50,000)

Additional information:

On 1 December 2019, BNB purchased an online sales order control computer package for RM100,000 from Ercel-Com. Included in the purchase price is a maintenance service of 3 years for RM3,000 each year. BNB employed the services of a consultant to install and test the software for RM2,000.
On 30 June 2020, BNB determines the present value of cash flows expected from the use of the patent to be RM250,000 and the fair values less cost to sell will be RM245,000. The useful life of the patent following the impairment test on 30 June 2019 is 4 years.
Amortisation is recognised on a straight-line basis over the estimated useful lives of intangible assets of 5 years from the date that they are available for use.

REQUIRED:

Prepare the journal entries related to the intangible assets for the financial year 2020. Show all the workings.

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