Question

QUESTION ONE Part A Advance Media Ltd provides high quality digital solutions to its customers in Melbourne. The company's financial year ends on 31 December. The company had following transactions and events during 2016. January 1 Purchased a patent for $150,000 cash. The patent has a legal life of five (5) years. April 30 Paid $75,000 to research and develop a new software program but wasn't sure whether the software would in fact generate any revenue. July 1 Purchased a computer from the Dell Global Computer Centre for $6,000 cash plus installation cost of $400, and delivery costs of $350. The computer has a useful life of four (4) years. December 31 Recorded depreciation and/or amortisation for the year. The company uses straight line method and assumes zero residual value when determining the periodic depreciation and/or amortisation charges. REQUIRED: Prepare the journal entries to record the above transactions and events for 2016. [Narrations are not required] Prepare the non-current asset section of the Statement of Financial Position of Advance Media Ltd as at 31 December 2016.

Answer 1

Jan-01	Patent	$        1,50,000
	Cash		$        1,50,000
	(Purchase of patent)
Apr-30	Research & development expenses	$            75,000
	Cash		$            75,000
	(Payment towards research and development expenses)
Jul-01	Computer equipment (6000+400+350)	$              6,750
	DellGlobal computer		$              6,750
	(Purchase of computer from DellGlobal computer and capitalized installation and delivery charges)
Dec-31	Amortization expense(150000/5)	$            30,000
	Accumulated amortization-Patent		$            30,000
	(Amortization accounted on the patent)
Dec-31	Depreciation expense	$                  844
	Accumulated depreciation-Computer equipment		$                  844
	(Depreciation expense recognized on the computer)

R&D expenses

Research and development expenses which are unable to generate cash flows should charge off to profit and loss account.

Computer

All costs incidental to the purchase of an asset should capitalize to asset including installation and delivery cost.

Particulars	Cost	Useful life (years)	Depreciation per year	No of months on 2016	Depreciation/Amortization for 2016	Closing Balance as on December 2016
Patent	$        1,50,000	$                  5	$                30,000	$                    12	$            30,000	$ 1,20,000
Computer	$              6,750	$                  4	$                  1,688	$                      6	$                  844	$ 5,906.25

(ii)

Non-current assets
(a) Fixed assets
(i) Tangible assets		$        5,906.25
(ii) Intangible assets		$        1,20,000