ANSWER ALL QUESTIONS Question According to the Framework, assets do not exist un

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ANSWER ALL QUESTIONS Question According to the Framework, assets do not exist unless they can create probable future benefits an a Determining these two criteria which give rise to an asset is Explain the probable future benefit and past transaction that triggers the existence of result from past transactions always straightforward the following assets: (a) (b) (c) (e) (t) accounts receivable, RMS1,100 prepaid insurance, RM12,000 inventory of work-in-process, RM6,150 deffered tax asset, RM48,670 rescarch and development, RM25,000 (2m) (2m) (2m) (2m) (2m) Question2 Are the following assets? Explain by using the definition and recognition criteria a) Purchase of raw materials for production, RM12,000 b) Paid advertising cost for Hari Raya promotion, RM25,000 c) Cost of RM2,000 to remove 2 small machines, to make way for instalment new machine.

Explanation / Answer

Q-1) a) The past transaction is the credit sale that was made earlier. The future benefit is the cash that is likely to be received from the asset. b) The past transaction is the cash that has been paid. The future benefit is the insurance cover for the future. c) The past transactions are the various expenses like materials, labor and overheads that are incurred to bring the WIP into being. The future benefit is the amount that is going to be received once the WIP is converted into finished goods and then sold. e) As accounting income and taxable income may differ, the tax paid on the taxable income may be more than the tax on the accounting income for any year. When these are due to temporary differences, the diffence in tax so paid would be an asset as it can be set off against tax on accounting income later. f) It is cost incurred to do research and development on new products, new processes, etc. The future benefit is the profits that woulc be derived on account of the new product or process. Q-2) a) Raw materials stock is the result of materials purchased. It results in future benefit when it is used in producing good or services. Hence, raw materials constitute an asset. b) When advertising cost is paid for promotion, it would result in future benefit in the form increased sale and increased profits. Hence, the amount incurred is an asset till it ceases to give benefits. c) The cost of removing the old machines for the sake of installing the new machine, will result in future benefit when the new machine becomes operational. The expenditure is generally added to the cost of the new machine.

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