The Following Transactions Relate to MicroChip, a Manufacturer Located in Thailand.Indicate

question 5

Essay

The following transactions relate to MicroChip, a manufacturer located in Thailand.Indicate whether each transaction immediately gives rise to an asset of the company under U.S.GAAP and separately, under IFRS.If MicroChip recognizes an asset, state the account title, the amount, and the classification of the asset on the balance sheet as either a current asset or a noncurrent asset.MicroChip reports its results in millions of baht (Bt).

a. MicroChip invests Bt800 million in a government bond. The bond has a maturity value of Bt1,000 million in five years, and MicroChip intends to hold the bond to maturity.

b. Two months prior to its year-end, MicroChip pays its insurer Bt240 million to cover annual premiums on its European plants.

c. MicroChip pays a developer in another country Bt6 million for an option to purchase a tract of land on which it intends to build a warehouse to serve future markets. The price of the land is Bt450 million.

d. MicroChip signs a four-year employment agreement with its chief executive officer for a package valued at Bt17.4 million per year. Of this amount, Bt3.1 million is base salary; the rest is expected bonus and deferred compensation arrangements. The contract period begins next month.

e. MicroChip spends Bt80 million on research and development (R&D) related to new, circuitry; 60% of the total amount was spent on pure research, the rest on development. The R&D is successful, and the firm is able to acquire a patent on the new circuitry. The cost of filing the paperwork and other procedures to obtain the patent is Bt0.5 million.

f. MicroChip received notice that a component supplier had shipped by freight components invoiced at Bt700 million with payment due in 30 days. The supplier retains title to the components until received by MicroChip.

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Definitions:

National Bank System

A network of banks chartered by the federal government in the United States, established to create a stable, national currency and improve the government's control over the economy.

Modern War

Warfare characterized by the use of current technology and tactics, involving nations or groups, and often including cyber warfare and advanced weapons systems.

Industrial Technology

The application of engineering and manufacturing technology to make production faster, simpler, and more efficient.