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QUESTION 3 Izzudin Bhd from time to time embarks on a research program when a special...

QUESTION 3

Izzudin Bhd from time to time embarks on a research program when a special project seems to offer possibilities. In 2018, the company expends RM325,000 on a research project, but by the end of 2018 it is impossible to determine whether any benefit will be derived from it.

REQUIRED:

  1. What account should be charged for the RM325,000, and how should it be shown in the financial statements?
  2. The project is completed in 2019, and a successful paten is obtained. The development costs to complete the project were RM110,000 (RM36,000 of these costs were incurred after achieving economic viability). Additional administrative and legal expenses incurred in obtaining patent number #777 in 2019 total RM24,000. Record these costs in journal entry form.
  3. Additional engineering and consulting costs incurred in 2020 required to advance the design of a product to the manufacturing stage total RM60,000. These costs enhance the design of the product considerably, but it is highly uncertain if there will be a market for the new version of the product (it has not achieved economic viability). Discuss the proper accounting treatment for this cost.

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Expert Solution

ekkarill92 answered 2 years ago
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