Reference no: EM132906240

Question - Basil Company has incurred P200,000 of research expenditures on a project to develop a new type of fuel and has expensed these costs. On January 2, 2017, Rey Company purchases the research project, including certain patents that have been registered by Basil Company, for P300,000. Subsequently, Rey Company incurred P400,000 of expenditure on completing the research phase and decides to develop the product commercially. It incurred further costs of P600,000 before the product reached the stage where the conditions for recognizing development costs of an internally generated intangible assets are met. After that stage, further costs of P2,000,000 are incurred in bringing the product to a condition where it is ready for use in the manner the management intended. Initial marketing costs and losses are incurred at P400,000 before the product was successfully launched.

Required - How much is the total amount of intangible asset shall Rey Company recognize in relation to the above costs?