Prime Limited is a manufacturer of multimedia projectors. The company invests heavily in research and development to improve existing products. A free-lance researcher Mr. Ripley sent a conceptual paper to the company on development of a new type of projector which will significantly enhance the life and quality of the product. An agreement was reached between Mr. Ripley and the company whereby Mr. Ripley agreed to conduct and supervise the research and development process at a lump sum remuneration of RM8 million. However, he agreed to reduce his remuneration to a time-based salary of RM2,000 per hour if the research was unsuccessful. The process of research commenced from July 2019 and the following costs were incurred up to June 30, 2020. RM 1. Furnishing of the new laboratory 2. Tools purchased 800,000 2,000,000

Prime Limited is a manufacturer of multimedia projectors. The company invests heavily in research and development to improve existing products. A free-lance researcher Mr. Ripley sent a conceptual paper to the company on development of a new type of projector which will significantly enhance the life and quality of the product. An agreement was reached between Mr. Ripley and the company whereby Mr. Ripley agreed to conduct and supervise the research and development process at a lump sum remuneration of RM8 million. However, he agreed to reduce his remuneration to a time-based salary of RM2,000 per hour if the research was unsuccessful. The process of research commenced from July 2019 and the following costs were incurred up to June 30, 2020. RM 1. Furnishing of the new laboratory 2. Tools purchased 800,000 2,000,000

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 54C: Manny Carson, certified management accountant and controller of Wakeman Enterprises, has been given...

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Question

(i)

You are required to identify which item to be expensed out and to be

capitalized as an intangible asset for each of the items, keeping in view the

requirements of MFRS 138: Intangible Assets.

Prime Limited is a manufacturer of multimedia projectors. The company invests
heavily in research and development to improve existing products.
A free-lance researcher Mr. Ripley sent a conceptual paper to the company on
development of a new type of projector which will significantly enhance the life and
quality of the product.
An agreement was reached between Mr. Ripley and the company whereby Mr. Ripley
agreed to conduct and supervise the research and development process at a lump sum
remuneration of RM8 million. However, he agreed to reduce his remuneration to a
time-based salary of RM2,000 per hour if the research was unsuccessful.
The process of research commenced from July 2019 and the following costs were
incurred up to June 30, 2020.
RM
1. Furnishing of the new laboratory
2. Tools purchased
800,000
2,000,000

3. Salaries paid to research associates
4. Cost of conducting tests in U.K. on a device which was
ultimately used in final product
5. Remuneration paid to Mr. Ripley on successful completion
of research
1,620,000
400,000
4,500,000
6. Expenses on preparing technical feasibility
7. Cost of manufacturing the samples before commencement
of commercial production
8. Material imported for commercial production
9. Final payment to Mr. Ripley
10.Product launching expenses
250,000
240,000
1,700,000
3,500,000
1,200,000

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