Question

Pribuss Engineering prepares its financial statements according to International Financial Reporting Standards. During the year, the company incurred the following costs related to a new product design: 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 $ 3,752,000 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 current fiscal year. What amount should Pribuss expense in its current-year income statement related to the above expenditures?

Answer 1

Answer:

$2,400,000

Explanation:

According to  the IFRS, all research costs are charged to expense account and therefore the $2,400,000 shows as an expense on the debit side in its income statement for the year

Development costs and legal and filing fees should be capitalized as the requirements of technological and commercial viability have been identified, as well as the capacity of the asset to produce probable future economic benefits. So these amount would not be considered