Question Tag: Amortization

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QTB – Nov 2014 – L1 – SA – Q19 – Mathematics of Business Finance

Determines the interest rate condition for a sinking fund to have a lower periodic cost than amortization

Question

If the interest rate received on a sinking fund is ……………….., the periodic cost for the sinking fund is lower than that for amortization.
A. Lower than that charged on the debt
B. Equal to that charged on the debt
C. Higher than that charged on the debt
D. Equal to zero
E. Equal to one

Answer

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Tags: Amortization, Interest rates, Sinking Fund
Level: Level 1

Topic: Mathematics of Business Finance
Series: NOV 2014

CR – Nov 2020 – L3 – Q2a – Intangible Assets

Prepare a note reconciling the carrying amount of Katamanso’s intangible assets, including website development costs and copyright extension fees.

Question

Katamanso Ltd (Katamanso) is a company which is a subsidiary of a media company. Katamanso’s principal asset is the rights it owns to a classic film. Katamanso had the following intangible assets as at the year end 31 December 2017:

Intangible Asset	Cost (GH¢’000)	Accumulated Amortisation (GH¢’000)	Carrying Amount (GH¢’000)
Classic Film	10,000	(6,000)	4,000
Website	150	(90)	60
Total	10,150	(6,090)	4,060

The following information includes all relevant events that occurred during the year ended 31 December 2018:

i) The film was originally published on 1 January 1970 and the rights were acquired by Katamanso on 1 January 2015 for GH¢10 million. Copyright was set at 50 years from the date the film was originally published. The film was amortized by Katamanso using the straight-line method over the remaining copyright period. However, recent legislative changes passed on 1 January 2018 have extended the copyright period from 50 years to 70 years, subject to payment of a registration fee prior to the original expiry date. This, together with associated legal costs, amounted to GH¢70,000 and was paid on 1 January 2018. As a result, the market value of the rights to the film was GH¢12.1 million at 31 December 2018, according to Katamanso’s professional valuers, who determined the valuation on 1 January 2018.

ii) During the year Katamanso developed a new interactive website to market the film and associated merchandise given its extended copyright period. The website includes its own e-commerce system for online DVD sales, direct streaming of the film, associated material, and merchandise sales. The costs incurred are as follows:

Website Development Costs	Amount (GH¢’000)
Planning the new website	8
Registration of domain names	18
Internal design costs	85
External contractor design costs	112
New content development	38
Advertising of the new website	22

The new website went live on 1 July 2018 and the old website, which was being amortised using the straight-line method over five years, was taken offline on that date and will not be used for any other purpose.

Required:
Prepare a note reconciling the carrying amount of Katamanso’s intangible assets from the beginning to the year ended 31 December 2018 as required by IAS 38: Intangible Assets.
(Note: Comparative information is not required. All amounts are material.)

Answer

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Tags: Amortization, Development Costs, IAS 38, Intangible Assets
Level: Level 3

Topic: IAS 38: Intangible assets
Series: NOV 2020

FR – Dec 2022 – L2 – Q5a – Intangible Assets Treatment for Employee Training

Analyze the treatment of employee training costs as an intangible asset under IAS 38.

Question

Damba Ltd spent GH¢400,000 on training courses for its employees, which has resulted in increased efficiency and cost savings. The Assistant Accountant has recognized the training costs as an intangible asset and charged six months’ amortization based on the average time within which the training courses were completed.

Required:
Comment on the Assistant Accountant’s treatment of the aforementioned transaction in Damba Ltd’s financial statements for the year ended March 31, 2022, and advise on how it should be handled under International Financial Reporting Standards.

Answer

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Tags: Amortization, Employee training, Expense Recognition, Intangible Assets
Level: Level 2

Topic: IAS 38: Intangible assets
Series: DEC 2022

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

Question

Chidinma Ventures Plc. acquired a 12-year lease on a property on 1 October, 2016 at a cost of N132 million. The company’s policy is to revalue its properties to their market value at the end of each year.

Accumulated amortization is eliminated, and the property is restated to the revalued amount. Annual amortization is calculated on the carrying values at the beginning of the year. The market values of the property on 30 September 2017 and 2018 were N127.05 million and N96.25 million, respectively. The existing balance on the revaluation surplus at 1 October, 2016 was N27.5 million. This is related to some non-depreciable land whose value had not changed significantly since 1 October 2016.

Required:
Prepare extracts of the statement of profit or loss and statement of financial position for the year ended 30 September 2017 and 2018 in respect of the leasehold property.

Answer

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Tags: Amortization, IAS 16, Leasehold Property, Revaluation, Revaluation Loss, Revaluation Surplus
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

FR – Nov 2018 – L2 – SC – Q6a and Q6b – Property, Plant, and Equipment (IAS 16)

Calculate costs of various intangible assets and their carrying amounts as at December 31, 2017.

Question

Intangibles assets by their nature do not exist physically under IAS 38 Intangible assets. The
following information on initial cost of intangibles asset were extracted from the Notes to the
financial statements of Igbo-hood Limited, a film production company on January 1, 2017:

Additional Information:

(i)

(ii) Intangible assets are to be amortised on a straight line basis.

Required:
a. Calculate the costs of the following intangible assets:
i. Market based
ii. Customer related
i. Artistic related
iv. Contract based
v. Technology based

b. Calculate the carrying amounts of the following intangibles assets as at December 31, 2017
i. Quick books and SAGE
ii. Trade marks
iii. Plays
iv. Franchise

Answer

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Tags: Amortization, Carrying Amount, Customer-Related, Intangible Assets, Market-Based, Technology-Based
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: NOV 2018

FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation

Identifies items involving movement in cash flows.

Question

Which of the following items involves movement in cash flows?
A. Amortisation charges
B. Depreciation
C. Gain
D. Loss
E. Rent

Answer

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Tags: Amortization, Cash Flow, Depreciation, Gain and Loss, Rent
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2017

QT – Nov 2016 – L1 – Q4a – Mathematics of Business Finance

Explain the terms annuities, sinking fund, and amortization related to loan repayment.

Question

One of the most important applications of annuities is the repayment of interest-bearing debts. These debts can be paid by making periodic deposits into a sinking fund, which is used at a future date to pay the principal of the debt, or by making periodic payments that cover the outstanding interest and the principal. This second method is called amortization.

Required:
i) Explain the term annuities as used in the statement above. (2 marks)
ii) What is a sinking fund? (2 marks)
iii) When is a loan with a fixed rate of interest said to be amortized? (1 mark)

Answer

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Tags: Amortization, Annuities, Loan Repayment, Sinking Fund
Level: Level 1

Topic: Mathematics of Business Finance
Series: NOV 2016

CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets

Recommend the treatment of training, marketing, and customer list expenses in the financial statements.

Question

Oyarefa Ltd acquired 80% ordinary shares in Abokobi Ltd on 1 January 2015. The intangible assets of Abokobi Ltd include GH¢9 million of training and marketing expenditure incurred during the year ended 31 December 2016. The Directors of Abokobi Ltd believe that these should be capitalised as they relate to the startup period of a new business venture in Oyibi, and they intend to amortise the balance over the five years commencing 1 January 2017.

On 1 July 2016, Oyarefa Ltd purchased a customer list from the liquidator of a competitor. The price paid was GH¢4 million and was based on the list having a useful life of two years. At 31 December 2016, the Finance Director of Oyarefa Ltd commissioned a report on the value of the customer list from a firm of independent valuers. The firm has valued the customer list at GH¢5 million and estimates a total useful life of five years. The customer list is currently included in intangible assets at a carrying value of GH¢4 million, but the Finance Director wants the list to be revalued to the higher amount.

Required:
Recommend the treatment of the above in the consolidated financial statements for Oyarefa Ltd Group for the year ended 31 December 2016 in accordance with IAS 38: Intangible Assets.

Answer

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Tags: Amortization, Customer List, Intangible Assets, Training and Marketing

Topic: IAS 38: Intangible assets
Series: NOV 2017

QTB – Nov 2014 – L1 – SA – Q19 – Mathematics of Business Finance

Determines the interest rate condition for a sinking fund to have a lower periodic cost than amortization

Question

Answer

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Tags: Amortization, Interest rates, Sinking Fund
Level: Level 1

Topic: Mathematics of Business Finance
Series: NOV 2014

CR – Nov 2020 – L3 – Q2a – Intangible Assets

Prepare a note reconciling the carrying amount of Katamanso’s intangible assets, including website development costs and copyright extension fees.

Question

Intangible Asset	Cost (GH¢’000)	Accumulated Amortisation (GH¢’000)	Carrying Amount (GH¢’000)
Classic Film	10,000	(6,000)	4,000
Website	150	(90)	60
Total	10,150	(6,090)	4,060

The following information includes all relevant events that occurred during the year ended 31 December 2018:

Website Development Costs	Amount (GH¢’000)
Planning the new website	8
Registration of domain names	18
Internal design costs	85
External contractor design costs	112
New content development	38
Advertising of the new website	22

Answer

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Tags: Amortization, Development Costs, IAS 38, Intangible Assets
Level: Level 3

Topic: IAS 38: Intangible assets
Series: NOV 2020

FR – Dec 2022 – L2 – Q5a – Intangible Assets Treatment for Employee Training

Analyze the treatment of employee training costs as an intangible asset under IAS 38.

Question

Answer

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Tags: Amortization, Employee training, Expense Recognition, Intangible Assets
Level: Level 2

Topic: IAS 38: Intangible assets
Series: DEC 2022

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

Question

Required:
Prepare extracts of the statement of profit or loss and statement of financial position for the year ended 30 September 2017 and 2018 in respect of the leasehold property.

Answer

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Tags: Amortization, IAS 16, Leasehold Property, Revaluation, Revaluation Loss, Revaluation Surplus
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

FR – Nov 2018 – L2 – SC – Q6a and Q6b – Property, Plant, and Equipment (IAS 16)

Calculate costs of various intangible assets and their carrying amounts as at December 31, 2017.

Question

Additional Information:

(i)

(ii) Intangible assets are to be amortised on a straight line basis.

Required:
a. Calculate the costs of the following intangible assets:
i. Market based
ii. Customer related
i. Artistic related
iv. Contract based
v. Technology based

b. Calculate the carrying amounts of the following intangibles assets as at December 31, 2017
i. Quick books and SAGE
ii. Trade marks
iii. Plays
iv. Franchise

Answer

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Tags: Amortization, Carrying Amount, Customer-Related, Intangible Assets, Market-Based, Technology-Based
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: NOV 2018

FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation

Identifies items involving movement in cash flows.

Question

Which of the following items involves movement in cash flows?
A. Amortisation charges
B. Depreciation
C. Gain
D. Loss
E. Rent

Answer

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Tags: Amortization, Cash Flow, Depreciation, Gain and Loss, Rent
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2017

QT – Nov 2016 – L1 – Q4a – Mathematics of Business Finance

Explain the terms annuities, sinking fund, and amortization related to loan repayment.

Question

Answer

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Tags: Amortization, Annuities, Loan Repayment, Sinking Fund
Level: Level 1

Topic: Mathematics of Business Finance
Series: NOV 2016

CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets

Recommend the treatment of training, marketing, and customer list expenses in the financial statements.

Question

Required:
Recommend the treatment of the above in the consolidated financial statements for Oyarefa Ltd Group for the year ended 31 December 2016 in accordance with IAS 38: Intangible Assets.

Answer

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Tags: Amortization, Customer List, Intangible Assets, Training and Marketing

Topic: IAS 38: Intangible assets
Series: NOV 2017

Question Tag: Amortization

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QTB – Nov 2014 – L1 – SA – Q19 – Mathematics of Business Finance

Determines the interest rate condition for a sinking fund to have a lower periodic cost than amortization

You're reporting an error for "QTB – Nov 2014 – L1 – SA – Q19 – Mathematics of Business Finance"

CR – Nov 2020 – L3 – Q2a – Intangible Assets

Prepare a note reconciling the carrying amount of Katamanso’s intangible assets, including website development costs and copyright extension fees.

You're reporting an error for "CR – Nov 2020 – L3 – Q2a – Intangible Assets"

FR – Dec 2022 – L2 – Q5a – Intangible Assets Treatment for Employee Training

Analyze the treatment of employee training costs as an intangible asset under IAS 38.

You're reporting an error for "FR – Dec 2022 – L2 – Q5a – Intangible Assets Treatment for Employee Training"

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

You're reporting an error for "FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)"

FR – Nov 2018 – L2 – SC – Q6a and Q6b – Property, Plant, and Equipment (IAS 16)

Calculate costs of various intangible assets and their carrying amounts as at December 31, 2017.

You're reporting an error for "FR – Nov 2018 – L2 – SC – Q6a and Q6b – Property, Plant, and Equipment (IAS 16)"

FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation

Identifies items involving movement in cash flows.

You're reporting an error for "FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation"

QT – Nov 2016 – L1 – Q4a – Mathematics of Business Finance

Explain the terms annuities, sinking fund, and amortization related to loan repayment.

You're reporting an error for "QT – Nov 2016 – L1 – Q4a – Mathematics of Business Finance"

CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets

Recommend the treatment of training, marketing, and customer list expenses in the financial statements.

You're reporting an error for "CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets"

QTB – Nov 2014 – L1 – SA – Q19 – Mathematics of Business Finance

Determines the interest rate condition for a sinking fund to have a lower periodic cost than amortization

You're reporting an error for "QTB – Nov 2014 – L1 – SA – Q19 – Mathematics of Business Finance"

CR – Nov 2020 – L3 – Q2a – Intangible Assets

Prepare a note reconciling the carrying amount of Katamanso’s intangible assets, including website development costs and copyright extension fees.

You're reporting an error for "CR – Nov 2020 – L3 – Q2a – Intangible Assets"

FR – Dec 2022 – L2 – Q5a – Intangible Assets Treatment for Employee Training

Analyze the treatment of employee training costs as an intangible asset under IAS 38.

You're reporting an error for "FR – Dec 2022 – L2 – Q5a – Intangible Assets Treatment for Employee Training"

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

You're reporting an error for "FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)"

FR – Nov 2018 – L2 – SC – Q6a and Q6b – Property, Plant, and Equipment (IAS 16)

Calculate costs of various intangible assets and their carrying amounts as at December 31, 2017.

You're reporting an error for "FR – Nov 2018 – L2 – SC – Q6a and Q6b – Property, Plant, and Equipment (IAS 16)"

FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation

Identifies items involving movement in cash flows.

You're reporting an error for "FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation"

QT – Nov 2016 – L1 – Q4a – Mathematics of Business Finance

Explain the terms annuities, sinking fund, and amortization related to loan repayment.

You're reporting an error for "QT – Nov 2016 – L1 – Q4a – Mathematics of Business Finance"

CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets

Recommend the treatment of training, marketing, and customer list expenses in the financial statements.

You're reporting an error for "CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets"

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