On 1 October 2017, Kawuleza Taxi Services (Pty) Ltd extended its taxi service operations to Queenstown. The company incurred the following costs while setting up the business: Legal costs 5 000 Taxi licences 125 000 Business cards for taxi drivers 750 Posters for advertising 1 000 Consultancy fees 2 000 Cost of management time on application 6 000 The licences are valid for a period of four years from 1 October 2017. The company expects the future economic benefits from the use of the taxi licences to be consumed evenly over the fouryear period and that there will be a NIL residual value. On 30 September 2019, the Queenstown council decided to allow the company an additional two years licence usage at a fee of R25 000, and the company paid the fee on this date. The year‐end date is 30 September. Amortisation is included in administrative expenses in profit or loss. Ignore VAT. Required: Q.3.1 Calculate the amount that would be recognised as an intangible asset on 1 October 2017. Q.3.2 Calculate the carrying value of the taxi licence as at 30 September 2020. Q.3.3 *What are the key features (definition) of an intangible asset? * Provide one example of an intangible asset (OTHER than a licence).
On 1 October 2017, Kawuleza Taxi Services (Pty) Ltd extended its taxi service operations to
Queenstown. The company incurred the following costs while setting up the business:
Legal costs 5 000
Taxi licences 125 000
Business cards for taxi drivers 750
Posters for advertising 1 000
Consultancy fees 2 000
Cost of management time on application 6 000
The licences are valid for a period of four years from 1 October 2017. The company expects the
future economic benefits from the use of the taxi licences to be consumed evenly over the fouryear
period and that there will be a NIL residual value.
On 30 September 2019, the Queenstown council decided to allow the company an additional two
years licence usage at a fee of R25 000, and the company paid the fee on this date.
The year‐end date is 30 September. Amortisation is included in administrative expenses in profit
or loss. Ignore VAT.
Required:
Q.3.1 Calculate the amount that would be recognised as an intangible asset on 1 October 2017.
Q.3.2 Calculate the carrying value of the taxi licence as at 30 September 2020.
Q.3.3 *What are the key features (definition) of an intangible asset?
* Provide one example of an intangible asset (OTHER than a licence).
Q.3.4 In your own words explain the term “identifiable” as per IAS38 – Intangible assets.
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