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:

Reaffirmation Agreement

An agreement in which a debtor agrees to pay a debt even though it could have been discharged in bankruptcy.

Discharged

Released from liability; term applied to negotiable instrument liability that has terminated.

Cancel

The act of nullifying or terminating an agreement, subscription, or service.

Explicit Information

Information that is fully and clearly expressed, leaving nothing implied, often detailed and specific.