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Explain the appropriate treatment of expenditure on research

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Problem 1: Explain the appropriate treatment of their expenditure on research and development (R&D).

Other Expenses at income statement in financial ending 30 June 2021 is $391,000

The following expense items are included within the total of 'Other' expenses:

$125,000 of expenditure on a new energy-efficient product being developed by BB. The project commenced in January 2021 with a prototype to be developed by September 2021.

The product development manager has unofficially 'tested the market' and found several companies interested in purchasing the product once it has proven to be a feasible product noting that 'this breakthrough technology will be a major contributor to the sales of ABC ltd into the future.' Whilst ABC ltd do not currently have a commercially feasible product, the Board have committed a further $300,000 to the development and testing of a prototype.

Reference no: EM132984685

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