Guiglano Inc is a large publicly held corporation The

following #2213
Guiglano Inc. is a large, publicly held corporation. The following are six selected expenditures
that were made by the company during the current fiscal year ended April 30, 2014. The proper
accounting treatment of these transactions must be determined in order to ensure that
Guiglanos annual financial statements are prepared in accordance with IFRS.1. Guiglano spent
$3 million on a program that is designed to improve relations with its dealers. Dealers
responded well to the project and Guiglano's management believes that it will therefore result in
significant future benefits. The program was conducted during the fourth quarter of the current
fiscal year.2. A pilot plant was constructed during 2013-14 at a cost of $5.5 million to test a new
production process. The plant will be operated for approximately five years. After the five years,
the company will make a decision about the economic value of the production process. T he
pilot plant is too small for commercial production, so it will be dismantled when the test is over.3.
During the year, Guiglano began a new manufacturing operation in Newfoundland, its first plant
east of Montreal. To get the plant into operation, the following costs were incurred:(a) $100,000
to make the building fully wheelchair- accessible(b) $41,600 to outfit the new employees with
Guiglano uniforms(c) $12,700 for the reception tointroduce the company to others in the
industrial mall where the plant is located(d) $64,400 in payroll costs for the new employees
while they were being trained.4. Guiglano purchased Eagle Company for 56 million cash in early
August 2013. The fair value of Eagle's net identifiable assets was 55.2 million.5. The company
spent $14 million on advertising during the year. Of that, 52 .5 million was spent in April2014 to
introduce a new product to be released during the first quarter of the 2015 fiscal year and
$200,000 was used to advertise the opening of the new plant in Newfoundland. The remaining
expenditures were for recurring advertising and promotion coverage.6. During the first six
months of the 2013- 14 fiscal year, $400,000 was spent on legal work on a successful patent
application. The patent became effective in November 2013. The patent's legal life is 20 years
and its economic life is expected to be approximately 10 years.InstructionsFor each of the six
items presented, determine and justify the following:(a) The amount, if any, that should be
capitalized and included on Guiglano's statement of financial position prepared as at April 30,
2014.(b) The amount that should be included in Guiglano's statement of income for the year
ended April 30, 2014.View Solution:
Guiglano Inc is a large publicly held corporation The following

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