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Entity A had $8,800,000 of capitalised development expenditure at cost brought forward on 1 October 2018...

Entity A had $8,800,000 of capitalised development expenditure at cost brought forward on 1 October 2018 in respect of products currently in production and a new project began on the same date.

The research stage of the new project lasted until 31 December 2018 and incurred $455,000 of costs. From that date, the project incurred development costs of $156,000 per month. On 1 April 2019, the directors became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development at 30 September 2019.

Capitalised development expenditure is amortised at 10% per annum using the straight-line method.

REQUIRED:

Measure the amount will be charged to Statement of Profit or Loss for the year ended 30 September 2019 in respect of research and development costs.

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Answer #1
Research costs $455,000
Expensed development Jan-Mar ($156,000 × 3) $468,000
Depreciation on capitalised amount b/f (8,800,000 × 10%) $880,000
$1,803,000
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