Solution-Calculate total research and development to be

Calculate total research and development to be capitalised

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Reference no: EM133157004

Question - Sunshine Ltd (Sunshine) is uses EVA to determine if shareholder value is created. The Income Statement for (Sunshine) is provided below:

Income Statement for the year-ended 30 June 2022 for Sunshine Ltd
	2021	2022
	($ Millions)	($ Millions)
Net profit after income tax (NPAT)	160	416
Includes the following expenses:
Interest expense	80	80
Depreciation	50	40
Research and development (R&D)	140	140

The following additional information is provided:

No R&D expense was incurred in 2019 and 2020.

The benefits from R&D are generally consumed over 4 years.

Corporate tax rate is 20%.

Required -

a. Calculate the financing effect of interest to be eliminated from NPAT for 2022.

b. Calculate the total research and development amortisation expense for 2022.

c. Calculate the total research and development to be capitalised for 2022.

Reference no: EM133157004

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Calculate total research and development to be capitalised

Reference no: EM133157004

Reference no: EM133157004

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