Online available https aasb pdf accessed july fox

Intermediate financial accounting

Part A

Research is done usually to get knowledge on particular problem or a technology and mostly don’t have a practical aim and do not associate with any project so hence the research cost is usually recorded with in the profit and loss account. There are two kinds of research and they are basic and applied research. Basic research can be broadly defined as original investigation directed primarily towards the advancement of knowledge. It is undertaken without a specific practical aim or application and, consequently, there rarely exists any relationship between costs incurred on these activities and resulting future benefits. Hence these costs are simple transferred to profit and loss account unless they are someway associated with the project as given in the outline that is discussed later. In case of applied research, they are usually used to solving problems and it is undertaken with a practical aim. This research is identified with a particular project and meets the outlines; hence they are deferred and amortized over the financial years. Sometimes if the applied research does not satisfy the outline or the criteria then those expenses will be transferred to the profit and loss account. The outline or the criteria states that the cost incurred during the research project shall be deferred if such costs in relation to the project are expected beyond any reasonable doubt to be recoverable, that is should very much help in the commencing or the production of the project. (AASB, 2000)

Development

The cost of goods sold is the total cost incurred before the sales. It is usually the carrying value of the goods sold in a particular time. (Fox, 2013) In this case the large mart is planning to sell hundred collaborative hubs to the Australian military. The cost of goods sold for the collaborative hubs should add and deduct the following items; the cost sheet is given as follows –

The above mentioned should be followed by large mart to find out the cost of goods sold for the collaborative hubs. However large mart will not have any opening stock or work in progress or finished stock as this is the first time they will be manufacturing the product for the first time. The price of one product is said to be $3000 and this does not include the research and development cost because since these costs are directly attributed to the project this cost will be capitalized and amortized over the financial years. So this cost will appear in the balance sheet and neither is included in cost of goods sold or in the price of the product. (Karlina Nasution, Christine and Wardayani, 2019)

Conclusion

The report has given clear idea as to how the large mart has taken decisions regarding the treatment of the research and development cost and decided on how it should be capitalized and amortized over the financial years. The company showed the calculation of cost goods sold and how the company will be affected from the sale of rights of manufacturing rights and also how this is different from sale of products.

Total value of the van = $100000

To calculate depreciation

Value of van as of 30^th June 2010 = $100000-$3959 =$96041

Assets revalued at $104000

Fox, R., 2013. Cost of Goods Sold. Tax Strategies for the Small Business Owner, [online] pp.53-61. Available at: https://link.springer.com/chapter/10.1007/978-1-4302-4843-9_5 [Accessed 27 July 2021].

Hanel, P., 2006. Intellectual property rights business management practices: A survey of the literature. Technovation, [online] 26(8), pp.895-931. Available at: https://www.sciencedirect.com/science/article/abs/pii/S0166497205001793 [Accessed 27 July 2021].