Reference no: EM133010706

Entity A is a mobile phone producer listed in Hong Kong. It produces different types of mobile phones to various customers. To prepare for the company development, Entity A planned to spend more expenditures on research and devdelopment in coming year.

• Entity A had an existing capitalised development cost of $5,684,000 at cost brought forward on 1 October 2020 in respect of products currently in production. Besides, a new project also began on the same date.
• The research stage of the new project lasted until 30 November 2020 and incurred $685,400 of costs.
• On 1 December 2020, the project incurred development costs of $365,420 per month.
• On 1 March 2021, the directors became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development on 30 September 2021.
• The existing capitalised development cost is amortised using the straight-line method. The useful life is estimated at 50 years.
• The end of the reporting period is 30 September.

REQUIRED:

Problem 1: Measure the amount that will be charged to Statement of Profit or Loss for the year ended 30 September 2021 in respect of research and development costs.