Accounting · IAS 38 Intangible Assets
Merik Co incurred the following costs during the year ended 31 December 20X1 on a project to develop a new fuel-efficient engine: - January to June: $50,000 spent on researching new heat-resistant materials. - July to September: $30,000 spent on developing a prototype after the engine was found to be technically feasible and commercially viable. - October to December: $20,000 spent on further testing of the prototype. Commercial production started on 1 January 20X2. According to IAS 38, how should these costs be reflected in the financial statements for the year ended 31 December 20X1?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1$80,000 charged as an expense; $20,000 capitalised as an intangible asset
- 2$50,000 charged as an expense; $50,000 capitalised as an intangible asset✓
- 3$100,000 capitalised as an intangible asset
- 4$100,000 charged as an expense
Correct answer
$50,000 charged as an expense; $50,000 capitalised as an intangible asset
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