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19 KAPLAN
Amco Co carries out research and development. In the year ended 30 June 20X5 Amco Co
incurred total costs in relation to project X of $750,000, spending the same amount each
month up to 30 April 20X5, when the project was completed. The product produced by the
project went on sale from 31 May 20X5.
The project had been confirmed as feasible on 1 January 20X5, and the product produced by
the project was expected to have a useful life of five years.
What is the carrying amount of the development expenditure asset as at 30 June 20X5?
A $295,000
B $725,000
C $300,000
D $0ANS
The costs of $750,000 relate to ten months of the year (up to April 20X5). Therefore the costs per month were $75,000. As the project was confirmed as feasible on 1 January 20X5, the
costs can be capitalised from this date. So four months of these costs can be capitalised =$75,000 × 4 = $300,000.
The asset should be amortised from when the products go on sale, so one month’s
amortisation should be charged to 30 June 20X5. Amortisation is($300,000/5) × 1/12 =$5,000.
The carrying amount of the asset at 30 June 20X5 is $300,000 – $5,000 = $295,000Good day, I don’t understand how the 750,000 relates to 10months of the year when the project started in January 20×5.I’ll appreciate if you can explain better
Hi,
They have spent this amount up to 30 April 20X5, which is 10 months into the year that started on 1 July 20X4.
Thanks
Capitalised development cost 20000000
Amortisation 6000In addition to the capitalised development expenditure of $20 million, further
research and development costs were incurred on a new project which commenced
on 1 October 2007. The research stage of the new project lasted until 31 December
2007 and incurred $1.4 million of costs. From that date the project incurred
development cost of $800,000 per month. On 1 April 2008 the directors became
confident that the project would be succesful and yield a profit well in excess of its
costs. The project is still in development at 30 September 2008.
Capitalised development expenditure is amortised at 20% per annum using the
straight-line method. All expensed research and development is charged to cost of
saleWhy the research cost is not apportioned by 3 month (Oct-Dec) please?
Because in the answer it takes 1400 m directly
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