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Hi.I have question about capital and revenue expenditures.Is the advertising is research expenditure?There is one question in Kaplan exam kit,where advertising is taken as research expenditure.But in another question in BPP kit they took”an illuminated sign advertising the business name” as a capital expenditure?Why is that? Thank you in advance
I have one more question:
Merlot Co is engaged in a number of research and development projects:
Project A A project to investigate the properties of a chemical compound.
Project B A project to develop a new process which will save time in the
production of widgets. This project was started on 1 January 20X5 and
met the capitalisation criteria on 31 August 20X5.
Project C A development project which was completed on 30 June 20X5. Related
costs in the statement of financial position at the start of the year were
$290,000. Production and sales of the new product commenced on
1 September and are expected to last 36 months.
Costs for the year ended 31 December 20X5 were as follows:
$
Project A 34,000
Project B costs to 31 August 78,870
Project B costs from 31 August 27,800
Project C costs to 30 June 19,800
What amount is expensed to the statement of profit or loss and other comprehensive
income of Merlot Co in respect of these projects in the year ended 31 December 20X5?ANSWER:$147,292
$
Project A 34,000
Project B 78,870
Project C ($290,000 + $19,800) × 4/36 34,422
–––––––
147,292
–––––––
Why do we calculate 19800 for 4 months,but project B’s costs(78870) completely for the year?The illuminate sign is a non-current asset – it is something that is expected to last for several years.
Project B’s costs are stated as being the costs from 31 August therefore all of the costs are included since it met the capitalisation criteria.
Project C only started production on 1 September and therefore only met the criteria for 4 months of the year.
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