Glass 4 Windows is involved in a research and development project to create a filtering window that removes the need for curtains.For the current year ended 30 June 2011 expenditure on the project is as follows: $$\begin{array} { | l | l | }
\hline \text { Research } & \$ 235000 \
\hline \text { Development costs } & \$ 350000 \
\hline
\end{array}$$ The window is expected to earn revenues of $70 000 per year for the 10 years commencing 1 July 2011.Assuming straight-line amortisation,how much of the research and development cost should be expensed this period and what amount should be amortised in the year ended 30 June 2014?

Question

Glass 4 Windows is involved in a research and development project to create a filtering window that removes the need for curtains.For the current year ended 30 June 2011 expenditure on the project is as follows: $$\begin{array} { | l | l | } 
\hline \text { Research } & \$ 235000 \
\hline \text { Development costs } & \$ 350000 \
\hline
\end{array}$$ The window is expected to earn revenues of $70 000 per year for the 10 years commencing 1 July 2011.Assuming straight-line amortisation,how much of the research and development cost should be expensed this period and what amount should be amortised in the year ended 30 June 2014?

Quizplus · Accepted Answer

According to accounting standards, research costs are expensed as incurred, so the $235,000 spent on research is expensed in the current period. Development costs that meet certain criteria can be capitalized and amortized over their useful life. The development cost of $350,000 will be amortized over the 10-year expected revenue-generating life of the product, resulting in annual amortization of $35,000 ($350,000 / 10 years).

Glass 4 Windows Is Involved in a Research and Development Research $235000 Development costs $350000\begin{array} { | l | l | } \hline \text { Research } & \$ 235000 \\\hline \text { Development costs } & \$ 350000 \\\hline\end{array} Research Development costs ​$235000$350000​​

Glass 4 Windows Is Involved in a Research and Development $\begin{array} { | l | l | } \hline \text { Research } & \$ 235000 \\\hline \text { Development costs } & \$ 350000 \\\hline\end{array}$