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What amount can be capitalised for the year ended june

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MakeACure produces and sells medications. They conduct research and then undertake development together with extensive medical trials and if results are successful they seek government approval to manufacture and sell the medication.

  • During 1 July 2019 - 30 June 2020 they produced and sold $15,000,000 worth of medications. Also, MakeACure undertook research and testing for new medications and two new medications were approved for production.
  • Detailed accounting records are maintained for each new medication from the time trials start, to when government approval is received. A total of $3,800,000 was spent during the year ended 30 June 2020 on research and testing, and of this $800,000 was spent for the two medications which received government approval on 20 June 2020.

Problem 1: What amount is to be expensed and what amount can be capitalised for the year ended 30 June 2020 for the research and testing expenditure applying AASB 138 Intangible Assets? Justify your treatment.

Reference no: EM133000595

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