Question 1:

Product development costs are a material cost for various companies. They are either written off as a capitalized or expense as an asset.

Required:

Show the conceptual issues involved and the definition of assets that can be applied in evaluating whether development expenditure should be treated as an asset or an expense.

(b) Suppose that each item listed below shows a separate class of assets. State whether they can be revalued and give journal entries if the accounting standards allow revaluation.

(i) KH Media has prepared a masthead for its magazine to the point that it is a very precious asset. Though the masthead is not presently recognized, management believes that it will be sold for $150,000.

(ii) Thames Publishing purchased a publishing title a year ago for $500,000 when other publisher went into liquidation. THE BOOK IS SELLING WELL AND MAAMNGEMENT BELIVES THAT IT COULD POSSIBLY SELL THE TITLE FOR$1.5 MILLION IF THEY EVR PUT IT ON TH MARKET.

(iii) Reno 56 get a franchise for an ice-cream stand at a shopping mall at a cost of $75,000.There is great need for this type of franchise as evidenced by recent sales of corresponding franchises at other shopping malls. The existing market price for such a franchise is $600,000.

Kt TECH HAS DEFERRED DEVELOPMENT COSTS OF $300,000 AND THE EVALUATED RECOVERABLE AMOUNT FOR THE DEVELOPMENT PROJECT IS $600,000.

YT engineering ltd believes its employees as its more valuable asset-yet it has to leave them off the statement of financial position. Describe this situation.