Surf n Turf Limited is involved in the research and development (R&D) of a new type of three-finned surfboard. For this R&D initiative, the company has incurred the following expenditure:

a).    $50,000 on developing a general understanding of water flow dynamics
b).    $30,000 on understanding what local surfers expect from a surfboard
c).    $190,000 on developing and testing a full prototype of the three-finned board to be called “Hurricane”

There is expected to be a very large market for the product that will generate many millions of dollars in revenue.

Required
Determine how the above expenditure would be treated for accounting purposes.

Answer rating: 100% (QA)

The expenditures of 50000 on obtaining a general understanding of waterflo... View the full answer