THIS IS A MULTIPLE CHOICE ANSWER. Pribuss Engineering prepares its financial sta
ID: 2571489 • Letter: T
Question
THIS IS A MULTIPLE CHOICE ANSWER.
Pribuss Engineering prepares its financial statements according to International Financial Reporting Standards. During 2018, the company incurred the following costs related to a new product design:
The development costs were incurred after technological and commercial feasibility was established and after the future economic benefits were deemed probable. The project was successfully completed and the new product was patented before the end of the 2018 fiscal year. What amount should Pribuss expense in its 2018 income statement related to the above expenditures?
Multiple Choice
A) $1,300,000
B) $2,400,000
C) $3,700,000
D) $3,752,000
Research for new pump design $ 2,400,000 Development of the new product 1,300,000 Legal and filing fees for a patent for the new design 52,000 Total $ 3,752,000Explanation / Answer
Answer: Option B) $2,400,000
Under the IFRS, all research costs are charged to expense and hence the $2,400,000 will be expensed in its income statement for 2018.
The development cost and legal and filing fees will be capitalized since the conditions of technical and commercial feasibility and the ability of the asset to generate probable future economic benefits has been established.
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