Q1 accounting for intangible assetssweet limited a new

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Reference no: EM13351870

Q1: Accounting for Intangible Assets

Sweet Limited, a New Zealand ice-cream manufactory, is trying to prepare a new flavor of ice-cream. The marketing department conducted a survey in August 2011 to assess consumer preference for the best flavor(s). The survey result indicates that hazel-nuts toffee flavor is the most popular one in NZ and Australia. The cost of the survey is $20,000.

The production department requires to identify some possible suppliers for the hazel-nuts and coffee beans used in producing toffee flavor ice-cream. The traveling expenses in visiting probable suppliers and checking on quality of the raw materials amount to $30,000. These expenses were incurred in November 2011 to February 2012.

In April 2012, the production department manufactured some hazel-nuts toffee ice-cream for testing. The cost of producing these ice-creams was $25,000. These ice-creams are used for one more marketing research. The second round research costs amount to $15,000. This time the consumers were asked to determine the taste and to evaluate how much they would like to buy it for. After a few more rounds of testing in May and June 2012, consumers demonstrate a satisfaction of the taste and they are willing to pay $8 per container (1 litre container). The cost of production is $2.5 per container. The overhead per container is $.50 cent. The marketing department guesses 1 million containers of hazel-nuts toffee ice-cream can be sold yearly.

Sweet Limited's balance date is 31 March.

Required:

Show the accounting treatment of Development and Research costs, stating at which point the hazel-nuts ice-cream project should be capitalized?
Give journal entries for the income year 2011 and 2012 correspondingly.

Q2: Accounting for Goodwill and goodwill impairment

Briefly show the accounting treatment of purchased goodwill.
Briefly describe impairment concept in relation to intangible assets, with reference to relevant accounting standards

Reference no: EM13351870

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