ACCA FR · Chapter 3 · Question 3 of 12
Turnstone Co has capitalised development costs of $500,000. Commercial production of the related product started on 1 July 20X7, and the product is expected to sell for 4 years. Amortisation is straight-line, and the year end is 31 December. What is the carrying amount of the development asset at 31 December 20X7?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $437,500
Explanation
Amortisation starts when the asset is available for use, which is when production starts on 1 July 20X7. Charge for 20X7 = $500,000 / 4 x 6/12 = $62,500. Carrying amount = $500,000 - $62,500 = $437,500.
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