F7 Chapter 26 Questions
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Hello,
In the first question of Vane plc why the amortisation is charged from Nov to Jan and then Feb to march? I did it directly from Nov 2012 to march 2013? If we consider calender year shouldn’t the amortisation be done from Nov to 31 Dec and then Jan to march? Please answer my doubt.
Thanks
Hello!
Why don’t you capitalise the development expenditure from November to January? Why is it expense?
I am about the first question.
Thanks in advance!
Because there was no certainty of its economic viability until 1 February
OK?
Thank you very much for your reply!
Can I use your lecture in order to prepare for F7?
Or there are some big differences with P2?
Hi Victoria
Yes, you can use the F7 lecture
and for question 2, why don’t we amortise the capitalised development expenditures for the two months?
Is it because the project is still in development?
Correct – the concept of amortising an intangible non-current asset is the same as depreciating a tangible non-current asset ie we are matching the expense against the related revenues that are generated from the use of those assets
And if development is still in progress there is no revenue yet being generated and so no amortisation is yet appropriate
OK?
thank you so much!
You’re very welcome
For Question 1, so when we have a reducing balance basis for amortisation, we don’t time aportion it?
Correct – too tricky to time apportion on a monthly basis without the use of an Excel spreadsheet
where did the 25,000,000 in question 3 cpt26 come from
3 years 9 months depreciation at the rate of $4,000,000 per annum ($40,000,000 / 10 years estimated useful life)
That’s $15,000,000 depreciation and the cost was $40,000,000
OK?
Sir, how did you get 9 months? which period are you using?
Isn’t it 1 June 2013 to 1 March 2014?
how to get questions relevant to the new exam structure of September 2016?
Hi sir..
How to simplify question number 1 ?
I’ve just recalculated question 1 and I think the answer should be $4,400,000 not $4,800,000
It’s $2,400,000 (30% x $8,000,000 brought forward)
$1,200,000 (4 months @ $300,000 per month)
$800,000 (2 months @ $400,000 per month)
Correction will be made
Should the amortisation not be time apportioned though? so:
$800,000 x 30% x 2/12 = $40,000
$300,000 x 4 months = $1,200,000
$400,000 x 2 months = $800,000
Total = $2,040,000
Isn’t 300,000 research cost and it should be expensed ?
It is correct the way it is, why are you adding up 800 000 to the expenses?
When I prepared the answers 3 weeks ago, I changed my mind and I’m happy that $4,800,000 is correct
In my opinion the correct answer should be 3,600, with calculations as below:
Amortization Expense = 2,400
Research Expense = 1,200
Total in P&L = 3,600
31 Oct onward monthly development cost @ $400,000 should be capitalised.
It wasn’t until 1 February that the project was forecast to be viable so those 3 months’ (November, December and January) development costs were spent on a project that had not as yet been determined to be profitable
The answer $4,800,000 is correct
Hi,
can explain me how you have arrived the above answer of $ 20,160?
Hi, have you been responded to. I am so confused , I don’t understand how 20160 is the right option
Is your answer working out as 21,000 ?
Hi Bola
If your looking for a response from Mike you will do better to put your question on the ask the tutor pages! I asked him a question in this thread some time ago and he never replied but I put it on ask the tutor and he came back to me the same day. I dont think he looks at recent comments very often but hes always looking at ask the tutor