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Dear sir
Could you please explain to me question 4:
Why should we amortise development costs and why should we multiply by 3/12 from march to june?Question 14:
Diluted earnings per share,
How do we get 800,000 shares?Two months, January and February, are pure research @ 40,000 per month = 80,000
March through June are deferred development costs = 4 * 40,000 deferred
July through September the revenue flows in so we match the benefit of the revenue with the appropriate element of the deferred costs. A full year amortisation would be 160,000 / 5 = 32,000
But the period to the year end is only 3 months so amortisation is 3 / 12 * 32,000 = 8,000
Total costs are therefore 80,000 + 8,000 = 88,000
Incidentally, March to June is FOUR months, not three per your post
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