Reference no: EM132731113

Question -

Part A - Corona Medical Ltd located in Bundoora is involved in a research and development project to develop a vaccine for Covid-19 virus in Melbourne. For the current year ended 30 June 2020 expenditure on the project is as follows:

Research $900,000 Development $1000,000

This vaccine project is expected to return profits of $100,000 per year for the 10 years commencing 1 July 2020. Assuming the company uses a straight-line method amortisation. This company uses a discount rate of 8 per cent.

Required -

i) How much research and development cost should be expensed in the year to 30 June 2020?

ii) How much development expenditure should be amortised in the year to 30 June 2021?

iii) Prepare the relevant journal entry/entries for amortization expenditure in year to 30 June 2021.

Part B - Emu Ltd was contracted to build a new apartment block for Kangaroo Ltd for $36,000,000. Payment of three $12,000,000 instalments were due and paid on June 30 of each year. The expected and actual costs at the end of each year are detailed as follows:

Year Expected Actual

1. 2020 8,000,000

2. 2021 13,000,000

3. 2022 10,000,000

Total 31,000,000

8,000,000 15,000,000 10,000,000 33,000,000

Note: The outcome the project can be measured reliably.

Required -

1. Calculate the percentage completion using the cost method at the end of each year (use percentages of 2 decimal places).

2. Calculate the gross profit (loss) and the revenue to be recognised each year (round to the nearest dollar) using the cost method.

3. Prepare the appropriate journal entries for year 2020 only.