1. Which of the following need to be established before development costs may be capitalised?

a) The cost of the product should be reliably identified

b) The business should have all necessary resources to complete the project

c)A customer should have placed a firm order for the development of the product

d)The business should be committed to completing the development

Choose 2 or 3 correct answers.

2. Burrow Ltd had spent $350,000 in 20x2 20x4 on the development of a product that would make rabbits infertile. During extensive testing it was discovered in 20x5 that this also affected sheep and was not marketed. In 20x6, the current financial year, chemists had developed at a cost of $100,000 a means of delivering the product below ground making it safe for farming use. The marketing staff estimated that it could be patented and so have a useful economic life of 10 years. The correct financial reporting treatment is

a) capitalise $100,000 and amortise over 10 years

b) capitalise $350,000 and amortise over 10 years

c) write off $ 450,000

d) capitalise $450,000 and amortise over 10 years