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 2x40000=80000
+ 1/3/14-30/9/14, amortisation 4x40000/5=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.
Ask the Tutor ACCA FR
Specimen exam multi choice Q4
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.
why do you think it should be July to September?
NO! Amortisation will only start once the drug goes into production and that's the three months July to September
I cannot believe that the ACCA answer identifies "March to June" if for no other reason than the fact that "March to June" is 4 months
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