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In: Accounting

1. Which of the following need to be established before development costs may be​ capitalised? a)...

1. Which of the following need to be established before development costs may be​ capitalised?

a) The cost of the product should be reliably identified

b) The business should have all necessary resources to complete the project

c)A customer should have placed a firm order for the development of the product

d)The business should be committed to completing the development

Choose 2 or 3 correct answers.

2. Burrow Ltd had spent $350,000 in 20x2 – 20x4 on the development of a product that would make rabbits infertile. During extensive testing it was discovered in 20x5 that this also affected sheep and was not marketed. In​ 20x6, the current financial​ year, chemists had developed at a cost of $100,000 a means of delivering the product below ground making it safe for farming use. The marketing staff estimated that it could be patented and so have a useful economic life of 10 years. The correct financial reporting treatment is

a) capitalise $100,000 and amortise over 10 years

b) capitalise $350,000 and amortise over 10 years

c) write off $ 450,000

d) capitalise $450,000 and amortise over 10 years

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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