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Capitalisation cost

This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.

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December 30, 2018 at 2:52 pm #499496
yusra97
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On 1 Jan 2001 Jinx Co commenced decelopment of a new computer game console. Development cost were$1m per month.
On 1 October 2001 Jinx Co firmly believes that it has sufficent knowledge and resources to finish the product. Market research demonstrates that there will be a high demand for this new console.
How much can be capitalised in the year ended 31 dec 2001 in respect of development activities?
Sir where does this say that he has started from october? The answer says it started from october.. it is written jinx co commenced development of a new computer game console? 3 months multiplied by 1 million
December 30, 2018 at 5:34 pm #499505
John Moffat
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They commenced development on 1 January, so by 1 October they will have spent 9 months x $1M.
December 30, 2018 at 6:27 pm #499509
yusra97
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sir but the asnwer is 3 million for 3 months? why is it? dont get it?
December 31, 2018 at 8:51 am #499546
John Moffat
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Because it is only on 1 October that the conditions for capitalisation as development costs are fulfilled (that there will be demand, they will have sufficient resources). So it is only the expenditure from then on that is capitalised.
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