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Hi Mike,
I have a problem to understand the answer of ACCA Specimen exam multi choice Q4:
the drug development starts 1/1/2014, end 30/6/2014,monthly expense $40000.The director became confident with the project 1/3/14. the drug has 5 years life. what amount to P/L at the year end 30/9/14.my answer is: 1/1/14-28/2/14, expense 2×40000=80000
+ 1/3/14-30/9/14, amortisation 4×40000/5=32000 x 7mths/12mths=18667.
Total $98667.However, ACCA answer is 88000, they only calculate the amortisation for 3 months March to June, not until September.
Can you please explain why only amortise for 3 month, not upto the year end?Thank you.
No, they’re counting three months from July to September.
In addition, you don’t say whether or not production started and the drug started to be marketed after 30 June – I assume that it was.
If it were “March to June” that would have been 4 months (1 March to 30 June is 4 months)
The project was completed on 30/6/2014 when the drug went into immediate production.
ACCA ‘s answer for amortisation is 3 months March to June.
Can you please let me know when the amortisation should start and why?
Thank you very much.
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