QUIZ 2

1. Which of the following CANNOT be recognised as an intangible non‐current asset

in GHK’s statement of financial position at 30 September 20X1??

A. GHK spent RM132,000 developing a new type of product. In June 20X1

management worried that it would be too expensive to fund. The finances to
complete the project came from a cash injection from a benefactor received in
November 20X1.
B. GHK purchased a subsidiary during the year. During the fair value exercise, it was
found that the subsidiary had a brand name with an estimated value of RM50,000,
but had not been recognised by the subsidiary as it was internally generated.
C. GHK purchased a brand name from a competitor on 1 November 20X0, for
RM65,000.
D. GHK spent RM21,000 during the year on the development of a new product, after
management concluded it would be viable in November 20X0. The product is
being launched on the market on 1 December 20X1 and is expected to be
profitable.

2. Which of the following could be classified as development expenditure in M’s

statement of financial position as at 31 March 20Y0 according to MFRS 138
Intangible Assets?

A. RM120,000 spent on developing a prototype and testing a new type of propulsion

system. The project needs further work on it as the system is currently not viable.
B. A payment of RM50,000 to a local university’s engineering faculty to research new
environmentally friendly building techniques.
C. RM35,000 developing an electric bicycle. This is near completion and the product
will be launched soon. As this project is first of its kind it is expected to make a
loss.
D. RM65,000 developing a special type of new packaging for a new energy‐efficient
light bulb. The packaging is expected to reduce M’s distribution costs by RM35,000
a year.
3. Amco Co carries out research and development. In the year ended 30 June 20X5 Amco
Co incurred total costs in relation to project X of RM750,000, spending the same amount
each month up to 30 April 20X5, when the project was completed. The product produced
by the project went on sale from 31 May 20X5.

The project had been confirmed as feasible on 1 January 20X5, and the product
produced by the project was expected to have a useful life of five years.

What is the carrying amount of the development expenditure asset as at 30 June

20X5?

A. RM295,000.
B. RM725,000.
C. RM300,000.
D. RM0.

4. Which of the following statements relating to intangible assets is/are true?

Statement 1 All intangible assets must be carried at amortised cost or at an
impaired amount, they cannot be revalued upwards.
Statement 2 The development of a new process which is not expected to increase
sales revenues may still be recognised as an intangible asset.

A. Statement i only.
B. Statement ii only.
C. Both statements.
D. Neither statements.

5. Dempsey Co owns a pharmaceutical business with a year‐end of 30 September 20X4.

Dempsey Co commenced the development stage of a new drug on 1 January 20X4.
RM40,000 per month was incurred until the project was completed on 30 June 20X4,
when the drug went into immediate production. The directors became confident of the
project’s success on 1 March 20X4. The drug has an estimated life span of five years
and time apportionment is used by Dempsey where applicable.

What amount will Dempsey charge to profit or loss for development costs,
including any amortisation, for the year ended 30 September 20X4?

A. RM12,000.
B. RM98,667.
C. RM48,000.
D. RM88,000.
The following scenario relates to questions 6 – 10

During the year Darby started research work on a new processor chip. Darby has a past history
of being particularly successful in bringing similar projects to a profitable conclusion. In
addition to this, Darby spent RM200,000 training staff to use new equipment.

Darby also developed a new online platform during the year, spending RM100,000 a month
evenly from 1 February 20X5 to 31 October 20X5. Darby was unsure of the outcome of the
project, but doubts were resolved on 1 May, following successful testing. The platform
launched on 1 November 20X5 and was expected to last 5 years.

6. Darby’s accounting assistant has read something which states that intangible assets are
identifiable, non‐monetary items without physical substance.

Which TWO of the following relate to items being classed as identifiable?

(i) Items must have probable future economic benefits.

(ii) Items must arise from legal or contractual rights.
(iii) Items must have a measurable cost.
(iv) Items must be separable.

A. (i) and (ii).

B. (i) and (iii).
C. (ii) and (iii).
D. (ii) and (iv).

7. Which of the following statements is/are true?

Statement 1 Training for staff is to be capitalised as asset rather than expensed to
profit or loss.
Statement 2 Expenditure on processor chip is to be expensed to profit or loss
rather than being capitalised as asset.

A. Statement i only.
B. Statement ii only.
C. Both statements.
D. Neither statements.
8. How much should be recorded in Darby’s statement of profit or loss for the year
ended 31 December 20X5 in relation to the development of the online platform?

A. RM20,000.
B. RM120,000.
C. RM300,000.
D. RM320,000.

9. Which of the facts relating to the online platform is correct?

(i) The online platform will be subject to annual impairment review due to the
judgemental nature of the project.
(ii) Once capitalised, the development costs should be held at fair value at each year
end.
(iii) Depreciation on any plant used to develop the platform would be capitalised as
part of the development costs.

A. (i) only.
B. (ii) and (iii) only.
C. (iii) only.
D. (i) and (ii) only.

10. Darby acquired a patent with a 10 year life for RM500,000 on 1 January 20X5. On 31
December 20X5, management believed that the patent was less fully utilised than
expected and determined the following information as part of their impairment review:
RM’000
Potential sale proceeds of the patent 400
Estimated disposal costs 20
Value in use of the asset 480

What is the value of the impairment loss in the year ended 31 December 20X5?

A. RM70,000.
B. RM30,000.
C. RM20,000.
D. RM0.

(Total: 20 marks)