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GP LLC had 200 million USD of capitalised development expenditure at cost brought forward at January 1, 2015 in respect of products currently in production and a new project began on the same date.
The research stage of the new project lasted until April 31, 2015 and incurred 140 million USD of costs. From that date, the project incurred development costs of 1 million USD per month. On August 1, 2016 the directors became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development at December 31, 2016. Capitalised development expenditure is amortised at 12% per annum using the reducing-balance method.Required:
What amount will be charged to profit or loss for the year ended January 30, 2016 in respect of research and development costs?R&D up to April 31, 2015
140+1*15=155
Depreciation reducing balance method
200-(200*0.12)=176
Total expense
155+176=331Can you check the way of solving and if is worng, can you show the right way of solving
Hi,
The research costs of 140 m are expensed. Also, the development costs are expensed until 1 August. The costs following that date are then capitalised, but will not be amortised as the project is still being developed.
I’d put the numbers in but I’m not 100% sure that you’ve given the correct reporting date in the requirement.
Thanks
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