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B/f expenditure for the project at 1/1/2002 is $405000
Project: commercial production started during the year. Sales were 20,000 units in 2001 and future sales are expected to be: 20×2 30,000 units; 20×3 60,000 units; 20X4 40,000 units; 20X5 30,000 units. There are no sales expected after 20X5.
The company’s policy is to defer development in the first year of sale. Expenditure carried forward is written off evenly over the expected sales life of projects, starting in the first year of sale.
Sir this is a question from BPP text.
I am getting the amortisation as 101500 for this project for the year 2002 whereas the answer has deducted 90000 as amortisation.
Can u kindly explain the reason for this?
I’ve had a look at the question and I think there may be a mistake as it looks like they have amortised the intangible over the 5 years (450/5 = 90) but the dates given are slightly wrong.
I think it should state that the first 20,000 units were in 20X2, and not 20X1, and then the years should continue from there, so that there are then no sales expected after 20X6, and not 20X5.
I can see why you would get confused but don’t worry too much about it.
Thanks
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