Parsons Limited was involved in a highly successful plastics manufacturing business.It commenced a project to design a more efficient extrusion system for its plastic pipes.The following outlays occurred: January Research salaries $50 000 February Research materials $30 000 March re-development of the extrusion plant $400 000 April Final adjustments to the extrusion plant $25 000.The amount to be expensed by this company at the end of the financial year,30 June,is:
A)$30 000
B)$50 000
C)$80 000
D)$480 000.

Question

Quizplus · Accepted Answer

The research salaries and materials incurred in January and February should be expensed immediately as they are considered part of the research and development costs. The re-development of the extrusion plant in March and final adjustments in April can be capitalized as they are directly related to the development of the new extrusion system. Therefore, the total amount to be expensed at the end of the financial year is $80,000 (research salaries + research materials).

Parsons Limited Was Involved in a Highly Successful Plastics Manufacturing