Assoria Co

Assoria Co had $20m of capitalized dev. expenditure at cost brought forward at 1 Oct 20X7 in respect of products currently in production and a new project began on the same date.

The research stage of the new project lasted until 31 dec 20X7 and incurred $1.4M of costs. From that date the project incurred development costs of $800k/month. On 1 April 20X8 the directors of Assoria Co became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development at 30 Sept 20X8. Capitalized development expenditure is amortized at 20% p.a. using a straight line method.

What amount will be charged to P&L for the year ended 30 Sept 20X8 in respect of R&D?

The answer provided lists:

1) Research Costs – 1,400,000
2) Depreciation on capitalized amount: 4,000,000
3) Expensed Development (800×3): 2,400,000

Hi i have a little bit confusion about this question. I understand 1 and 3 but may i know why 2 is charged to sopl. In my understanding, the capitalised development cost will only be amortised when the asset is ready to use but in this case it says it is still being developed as at year end.

Thank u for your help.