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MC Question 4

Dempsey’s year end is 30 September 2014.

Dempsey commenced the development stage of a project to produce a new pharmaceutical drug on 1 January 2014.

Expenditure of $40,000 per month was incurred until the project was completed on 30 June 2014 when the drug went into immediate production.

The directors became confident of the project’s success on 1 March 2014.

The drug has an estimated life span of five years; time apportionment is used by Dempsey where applicable.

What amount will Dempsey charge to profit or loss for development costs, including any amortisation, for the year
ended 30 September 2014?

A     $12,000
B     $98,667
C     $48,000
D     $88,000