During Its First Year of Operation, Dovery Company Incurred $375,000

question 61

Multiple Choice

During its first year of operation, Dovery Company incurred $375,000 of research costs undertaken with the prospect of gaining new technical understanding about a new nanotechnology procedure. An additional $505,000 was incurred to develop a production process to use that new technology to produce a new lubricant product. Assume development costs meet six conditions such as technical feasibility to demonstrate future economic benefit. Under IFRS, which of the following is the appropriate accounting for these costs?

• A) capitalize $880,000 as an intangible asset
• B) expense $375,000 and capitalize $505,000 as an intangible asset
• C) expense $505,000 and capitalize $375,000 as an intangible asset
• D) Any of these options can be appropriate under IFRS.

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Definitions:

Cold Front

The leading edge of a cooler mass of air, replacing (at ground level) a warmer mass of air.

Air Mass

A large body of air with uniform temperature and humidity characteristics.

Warm Currents

Movements of warmer water within oceans and seas, which can influence climate and weather patterns in coastal regions.

Canary Current

A cold ocean current flowing southward along the western coast of North Africa, part of the North Atlantic subtropical gyre.