Peugeot spent €3,775,000 or research and development for a new transmission on its newest models. €1,200,000...

Peugeot spent €3,775,000 or research and development for a new transmission on its newest models. €1,200,000 was research expenses, and the rest was development costs, with 60% of that being incurred after technological feasibility was reached in August 1. Peugeot’s fiscal year begins on February 1. Assume that the new transmission has an economic life of 8 years, at which time it will be replaced by a newer transmission. Give me the journal entries for the 1st and 2nd year for this transmission R&D under IFRS. Show your work.

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Expert Solution

The research phase expenditures are charged to the statement of comprehensive income.

Development expenditure is capitalised as an internally generated intangible R&D; only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits.

Expenditure that cannot be classified into these two categories is treated as being incurred in the research phase.

Capitalization ceases and amortization of capitalized development costs begins when the product is available for general release. In the above case it is assumed that new transmission was available for release on August 1, hence expenditure incurred after 1 August will be charged as expense.

ekkarill92 answered 1 year ago

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