Question

Processes Limited is involved in the R& D of new processes to make manufacturing more efficient and environmentally friendly. The company has been working on a number of new projects for the past three years. On 31 October 20X5 the company was able to demonstrate the feasibility and potential markets for its latest project. In fact, it has a company that has already indicated it will purchase the technology for use in its manufacturing process when work is completed. Processes Limited has a 31 December year- end. It has incurred the following expenditures for this project: Research costs expensed in 20X2 to 20X5 $ 2,200,000 Development costs incurred prior 31 Oct. 20X5 1,800,000 Development costs incurred 31 Oct. to 31 Dec. 20X5 1,200,000 Advertising costs to launch new product 800,000

Required:
1. Indicate how each expenditure should be accounted for and why.
2. How would your answer be different if there was no potential interest in the product at this time.



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  • CreatedFebruary 17, 2015
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