Innovator Ltd incurred expenditure researching and developing a cure for a common disease found in turnips....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Innovator Ltd incurred expenditure researching and developing a cure for a common disease found in turnips. At the end of 2010 determined that the research and development project was unlikely to succeed because trials of the prototype had been unsuccessful. During 2011 a breakthrough in agricultural science improved chances of the product succeeding and development resumed. The project was completed in 2011. At the end of 2011 costs incurred on the project were expected to be recoverable. Innovator expects that 10 per cent of the project revenue will be received in 2012, 20 per cent in 2013, 30 per cent in 2014, 30 per cent in 2015, and 10 per cent in 2016. After five years the product will be at the end of its useful life because the disease found in turnips will have been eradicated. Costs incurred were as follows: Năm Research Development 2010 $40,000 $10,000 2011 $12,000 $60,000 Required: 1. How much research expenditure and development expenditure should be recognized as an expense in 2010? 2. How much research and development expenditure should be recognized as an expense in 2011? 3. State how much expenditure should be carried forward (deferred) and reported in the statement of financial position at the end of 2010 and 2011. 4. Prepare journal entries for the amortization of deferred costs in 2012 and 2013, assuming that actual revenues are as expected. State the amount of deferred expenditure carried forward in the statement of financial position in relation to the deferred costs. 5. Assume that after charging amortization based on sales revenue at the end of 2014 the discounted net cash flows expected to be generated from the deferred expenditure were estimated as $15,000. Prepare any journal entries required to account for this information. Innovator Ltd incurred expenditure researching and developing a cure for a common disease found in turnips. At the end of 2010 determined that the research and development project was unlikely to succeed because trials of the prototype had been unsuccessful. During 2011 a breakthrough in agricultural science improved chances of the product succeeding and development resumed. The project was completed in 2011. At the end of 2011 costs incurred on the project were expected to be recoverable. Innovator expects that 10 per cent of the project revenue will be received in 2012, 20 per cent in 2013, 30 per cent in 2014, 30 per cent in 2015, and 10 per cent in 2016. After five years the product will be at the end of its useful life because the disease found in turnips will have been eradicated. Costs incurred were as follows: Năm Research Development 2010 $40,000 $10,000 2011 $12,000 $60,000 Required: 1. How much research expenditure and development expenditure should be recognized as an expense in 2010? 2. How much research and development expenditure should be recognized as an expense in 2011? 3. State how much expenditure should be carried forward (deferred) and reported in the statement of financial position at the end of 2010 and 2011. 4. Prepare journal entries for the amortization of deferred costs in 2012 and 2013, assuming that actual revenues are as expected. State the amount of deferred expenditure carried forward in the statement of financial position in relation to the deferred costs. 5. Assume that after charging amortization based on sales revenue at the end of 2014 the discounted net cash flows expected to be generated from the deferred expenditure were estimated as $15,000. Prepare any journal entries required to account for this information.
Expert Answer:
Answer rating: 100% (QA)
A The expense to be recognized is Research cost of 2017 Development cost of 2017 The expense to be r... View the full answer
Posted Date:
Students also viewed these finance questions
-
Use the Monte-Carlo simulation technique to calculate the current price of the derivative, assuming three simulated paths. In the simulation, you must use some OR all of the following z(i, t) random...
-
An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 8%...
-
The following project is at the end of its sixth week. Find the cost and schedule variances. Also find the CPI, SPI, ETC, and EAC for theproject. Pre- Duration BudgetActual (wks) Cost () Copete...
-
Consider the two tables shown in Figure 6.37. The TerID column in the SALES_REP relation is a foreign key referring to the primary key column TerID in the TERRITORY relation. Figure 6.37 Relations...
-
Publicly traded corporations are required to have their financial statements audited by an independent auditor. The Canadian Securities Administrators National Instrument 52-109 Certification of...
-
Mega Electronix sells television sets and DVD players. The business is divided into two divisions along product lines. CVP income statements for a recent quarter's activity are presented below....
-
Rank the magnet pairs in Figure P27.15 in order of the magnitude of torque on magnet 2 , smallest torque first. Assume all the magnets are equal in strength and the spacing between magnets is...
-
Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter arc presented in the...
-
QUESTION THREE (a) (b) Joseph intends to start a small business specializing in software development to cater for the youth; however a business consultant has advised him to be extra careful before...
-
Determine the largest intensity w 0 of the distributed load that the beam can support if the beam can withstand a maximum shear force of V max = 1200 lb and a maximum bending moment of M max = 600 lb...
-
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.27 million. The fixed asset qualifies for 100 percent bonus depreciation in...
-
Jack and Alice McWilliams made a charitable cash contribution of \($50,000\) to a 50 percent organization and \($30,000\) charitable cash contribution to a 30 percent organization. The McWilliams...
-
A condition that may increase either the severity or frequency of an economic loss is: A. Adverse selection. B. Hazard. C. Peril. D. Risk.
-
A pooled income fund is a_______ created by a________ . A. Charity/trust. B. Foundation/university. C. Nonprofit/donor. D. Trust/charity.
-
Which of the following is not an element of an insurable risk? A. A sufficiently large number of homogeneous exposure units. B. Catastrophic loss. C. A definite loss. D. A fortuitous loss.
-
Gene MacArthur, a wealthy 55-year-old widower, wants to reduce his taxable estate, supplement his current income, provide an inheritance for his children, and benefit his alma mater. He doesnt want...
-
Scale up was carried out using constant power consumption per unit volume. The impeller diameter of the small reactor (Dsmall) is 80 mm. Calculate the impeller speed of the small reactor ( Nsmall)...
-
Express mass density in kg/m3 and weight density in lb/ft3. 1. Find the mass density of a chunk of rock of mass 215 g that displaces a volume of 75.0 cm3 of water. 2. A block of wood is 55.9 in. x...
-
Describe how competence, caring, and character affect your credibility as a communicator.
-
Explain the importance of establishing credibility for business communications.
-
Define and explain business ethics, corporate values, and personal values.
Study smarter with the SolutionInn App