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Delta Co has capitalized development costs brought forward of $420,000 at 1 January 2009. These costs have a remaining useful life of four years. During the year ended 31 Dec 2009, the following expenditure has been incurred on Project A:
$
Development costs 65,000
Research costs 22,000All research and development was completed in July 2009 on project A and Delta Co commenced production during the month. Delta Co applies IAS 38 Intangible assets guidance on capitalization of relevant costs. An amortization period of 4 years is deemed appropriate. Delta Co’s policy is to charge a full year’s amortization in the year of capitalized of a project.
What should be the total amortization expense be for the year ended 31 December 2009?
Presumably the book in which you found this question also contains an answer. This forum is to ask for help on things you do not understand – not simply to set me questions!!!
The research costs are not relevant because they are not capitalised and therefore have no amortisation.
The brought forward total plus the development expenditure during the year will result in an amortisation expense this year of 1/4 of the total.
No Sir, I reassure you you that in the book prepared by a teacher there is no Answer. Sir could you give me the steps in solving the question and it’s final answer.
I have told you the steps – add this years development costs to the brought forward figure, and then divide by four.
Hi, I am having difficulties in solving this question as I don’t know how much to capitalise for each year and how should the amortised amount be for each year. Could I get some guidance for this kind of questions?
R&D costs in 2011: $50Mil , 2012: $55Mil, 2013: $60Mil, 2014: $65Mil and 2015: $70Mil
If the accountant decides to reflect the underlying economic reality of the company and deems that 80% of its R&D outlay in each year should be capitalised and amortised at the beginning of the following year over a four year period, how can we compute the effects of capitalising R&D costs on the company’s income statement and balance sheet for FY2015? Applicable tax rate = 20%
Thank you so much!
You surely have an answer to this question in the same book in which you found the question?
You should use this forum to ask about whichever bit of the answer you do not understand.The question tells you how much to capitalise each year!!! For example, in 2011 they will capitalise 80% pf 50M = 40M. This will be amortised over 4 years, so $10M per year for each year from 2012 onwards.
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