e following relate to DM Ltd for the year ended 31 December 2011 i) DM Ltd is developing a new production process. During 211, expenditure incurred was GH₵ 100,000 of which GH₵ 90,000 was incurred before I December 2011 and GH₵10,000 between 1 December 2011 and 31 December 2011. DM Ltd can demonstrate that, at 1 December 2011, therecoverable amount of the know-how embodied in the process is estimated to be GH₵ 50,000. ii) An advertising campaign has just been completed on behalf of DM Ltd at a cost of GH₵ 75,000. The go-ahead for this campaign was given on the basis of an assurance from the agency used that it would generate GH₵ 200,000 additional profit over the next two years iii) On 31 December 2011 DM Ltd acquired the entire share capital of PML for GH₵ 700,000.at the date of acquisition, PML`s statement of financial position showed the following: GH₵ Non-current assets: GH₵ PPE 300,000 Intangibles-Goodwill on acquisition of QRS Enterprise100,000 400,000 Current Assets400,000 800,000 Equity 550,000 Current Liability250,000 All assets and liability are stated at what DM Ltd regards as their fair values iiii) A staff training program has been carried out by DM Ltd at a cost of GH₵ 125,000, the training consultant having demonstrated to the directors

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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A) The following relate to DM Ltd for the year ended 31 December 2011

i) DM Ltd is developing a new production process. During 211, expenditure incurred was GH₵ 100,000 of which GH₵ 90,000 was incurred before I December 2011 and GH₵10,000 between 1 December 2011 and 31 December 2011. DM Ltd can demonstrate that, at 1 December 2011, therecoverable amount of the know-how embodied in the process is estimated to be GH₵ 50,000.

ii) An advertising campaign has just been completed on behalf of DM Ltd at a cost of GH₵ 75,000. The go-ahead for this campaign was given on the basis of an assurance from the agency used that it would generate GH₵ 200,000 additional profit over the next two years

iii) On 31 December 2011 DM Ltd acquired the entire share capital of PML for GH₵ 700,000.at the date of acquisition, PML`s statement of financial position showed the following:

GH₵

Non-current assets:

GH₵

PPE 300,000

Intangibles-Goodwill on acquisition of QRS Enterprise100,000

400,000

Current Assets400,000

800,000

Equity 550,000

Current Liability250,000

All assets and liability are stated at what DM Ltd regards as their fair values

iiii)

A staff training program has been carried out by DM Ltd at a cost of GH₵ 125,000, the training consultant having demonstrated to the directors that the additional profits to the business over the next 12 months will be GH₵ 200,000

Required;

Calculate the amount which should be recognized as assets in DM Ltd consolidated statement of financial position as at 31 December 2011

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