Tech Inc is working on the development of a new technological system. During 20X1, Tech Inc spent
Question:
Tech Inc is working on the development of a new technological system.
During 20X1, Tech Inc spent £300,000 on developing the system, of which £220,000 was incurred before 4 September 20X1 and £80,000 was incurred between 4 September 20X1 and 31 December 20X1.
Tech Inc believes that the conditions for recognition of its development expenditure as an intangible asset were met as of 4 September 20X1.
Development of the system was still in progress at 31 December 20X1, at which date it was estimated that the recoverable amount of the system (based on the present value of the future expected cash flows obtainable from commercializing it) was £65,000.
Tech Inc uses a useful life of 10 years to a mortise its capitalized development costs.
Required:
Compute:
a) The gross value (pre-amortization and impairment) of the capitalized development costs at 31 December 20X1.
b) The amortization expense to be recognized during the year ending 31 December 20X1.
c) The impairment expense to be recognized during the year ending 31 December 20X1.
Expert Answer:
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