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I am referring to specimen question 4.
No idea what to do in this question. Any help?
January and February @ $40,000 are pure research costs and should be expensed.
$40,000 per month from March through June = $160,000 deferred development costs
Production started in July so amortisation should also start in July
A full year’s amortisation of $160,000 over 5 years is $32,000
But our period is only 3 months (July, August and September) so 1/4 * $32,000 = $8,000
Add to that the two months of January and February @ $40,000 per month and the answer is therefore $88,000
OK?
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