Montezemolo Engineering produces highly sensitive thermostatic switchgear for use in aeronautic and satellite production. As chief accountant at Montezemolo, you have been given the following information by the director of research in respect of the year ended 30 September 2012.

Project F550 This project commenced on 1 October 2011. By December 2011, the viability of the project was confirmed and it was agreed that the final product would be produced for sale. Costs incurred to 30 September 2012 amounted to £200,000, of which 25% relate to research expenditure and 75% to development expenditure.

Additional further costs to complete the development are £350,000 and these will be incurred in the year to 30 September 2013. The first sales are expected on 1 October 2013.

It was necessary to purchase a highly specialized electronic analyser, which was to be used initially to test production prototypes, then, when production commences, the analyser will be used to ensure the correct operation of the completed thermostatic switchgear. Given the highly specialist nature of the analyser it would be used only on Project F550. The analyser was purchased on 1 January 2012 at a cost of

£2,500,000, has an estimated useful life of six years and a forecast residual value of £100,000. Montezemolo Engineering charges a full year’s depreciation in the year of purchase.

The board of directors considers that this project will be similar to the other projects the company undertakes and is confident of a successful outcome. Sales forecasts have been prepared following completion as shown:

It is estimated that the final product would have a sales life of four years.

The company has sufficient finance to complete the development and enough capacity to produce the new product. »
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Show how the expenditure on Project F550 would be dealt with in the statement of comprehensive income and statement of financial position of Montezemolo Engineering for each of the years ending 30 September 2012 to 30 September 2017 inclusive. Extract entries only are required.

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000 Year to 30 September 2014 1,000 Year to 30 September 2015 1,000 Year to 30 September 2016 1,000 Year to 30 September 2017 1,000