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Project C:A development project which was completed on 30 June 20×5. Related costs on the balance
Sheet at the start of the year were $290000. Production and sales of the new product commenced on 1 September and expected to last 36 months.
Project C costs to 30 June was $19800
I wanna ask why should I use $19800 when i calculate the expense to the income statement in respect of these projects in the year ended 31 December 20×5?This is a illustration of the matching principle. At 1st of Jan, balance b/f is 290000, next project C cost to 30th June is 19800. U need to capitalize the 19800 thus it should be 290000+19800=309800. Than it is mention that on 1st of sept, production and sales commence and expected to last for 36 month. So we must divide the capitalize amount by 36 months which is 309800/36=8605.56. So expense for the year is from 1st sept to 31st dec 8605.56*3=25816.67. Based on the information available, this should be the solution. Please correct me if any seniors find my solution wrong.
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