Kelly Ltd is currently working on four research and development projects. Summar
ID: 2667723 • Letter: K
Question
Kelly Ltd is currently working on four research and development projects. Summarised data relating to each project's expenditure and recoverable amount is provided below.
Actual ($000)
Actual ($000)
Budgeted ($000)
Budgeted ($000)
Budgeted ($000)
Project
2011
2012
2013
2014
2015
Alpha
R & D expenditure
75
75
100
100
0
Expected revenue inflows
50
50
50
0
0
Beta
R & D expenditure
200
200
350
0
0
Expected revenue inflows
0
0
500
1250
500
Gamma
R & D expenditure
1500
500
250
0
0
Expected revenue inflows
0
0
1750
1750
750
Delta
R & D expenditure
0
1500
0
0
0
Expected revenue inflows
0
0
500
250
250
All revenue and expenditure predictions are deemed to be 'probable'. A discount rate of 6 per cent is used. In relation to the specific projects, the following information is also available:
Project Alpha
This project involves the compilation of all known information about the abrasive natures of different types of sea weed. The revenue inflows of $50,000 per year are being provided by a major shipping company.
Project Beta
This project relates to the ultimate development of a surfboard that will allow surfers to do more radical manoeuvres. Fifty per cent of the expenditure in 2011 was considered to represent research, while the balance of the related expenditures represents development.
Project Gamma
This project involves the development of a wetsuit with a rechargeable heat-pack. Initially, surfers rejected the concept because they believed it would create pain because of small electric shocks, and sales prospects looked poor. However, in 2012, surfers changed their minds and large-scale demand for the product was created. Only $250,000 of the expenditure in 2011 was deemed to represent research and the balance of all other expenditure was deemed to be development.
Project Delta
This project involved the development of a new wrist watch that predicts the height of waves. $250,000 has been spent on research and the balance on development. It is expected that only $1,000,000 will be recoverable.
Required:
Determine how much research and development expenditure should be deferred as at the end of 2012.
Actual ($000)
Actual ($000)
Budgeted ($000)
Budgeted ($000)
Budgeted ($000)
Project
2011
2012
2013
2014
2015
Alpha
R & D expenditure
75
75
100
100
0
Expected revenue inflows
50
50
50
0
0
Beta
R & D expenditure
200
200
350
0
0
Expected revenue inflows
0
0
500
1250
500
Gamma
R & D expenditure
1500
500
250
0
0
Expected revenue inflows
0
0
1750
1750
750
Delta
R & D expenditure
0
1500
0
0
0
Expected revenue inflows
0
0
500
250
250
Explanation / Answer
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