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Please, I calculated the research cost from Aug to Oct 4million and from Nov to January 4million. I based the development cost from Feb when there was an increase from Feb till may total of 6.250m but yet I am not clear on how to get the answer.
But it was only from May 31 that the directors announced their confidence in the viability of the project so only 2 months may be deferred as development expenditure
OK?
So it should be 5m + 5m ÷ 3 = 33333333. Is it the right approach. Why is it divided by 3. Or have I taken the wrong approach to the answer. If no, can you be explicit. Thabks
I don’t think I am clear on this question.can you also help on how this should be amortized
“So it should be 5m + 5m ÷ 3 = 33333333. Is it the right approach. Why is it divided by 3. Or have I taken the wrong approach to the answer. If no, can you be explicit. Thabks” – The directors declared viability just 2 months before the year end
Expenditure is at the rate of $5m per quarter
So 2 months is $3,333,333
And there’s NO amortisation because development work is still in progress – therefore no income is being generated against which to match any amortisation
Better?
Thanks! Now I understand. Development expenditure shouldn’t be amortized until completed
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