As chief accountant at Bluestone Machines manufacturing Company, you have been given the following information by the director of research:   

Project ‘Pearl’                                                                                                                OMR ‘000’

Costs to date (pure research 25%, applied research 75%), 2014                                                                  850

Costs to develop product (to be incurred in the year to 31st Dec 2014)                                                  3,600

Expected future sales per annum for 2015–2020                                                                                        2,000

Non-current assets machine purchased in 2014 for the project:

Cost                                                                                                                                                                        9,100                              

Estimated useful life 7 years

Residual value                                                                                                                                                         700

The board of directors considers that all the criteria of IAS 38 to capitalize development cost as an intangible asset are met.

Required:

1. Calculate the amounts of depreciation and amortization.                                                                                                                                                 

               

2. Show accounting entries in the company’s accounts for research cost, development cost and amortization.                                                                                                  
3.     
4. Show how depreciation, amortization and research cost will be recorded in statement of profit or loss for each of the years ending 31st Dec 2014–2020.

                                                                                                                                              

4. Show how tangible and intangible assets will be recognized in statement of financial position for each of the years ending 31st March 2014–2020.

                                                                                                                                            

5. Briefly explain the criteria of IAS 38 to capitalize development cost as an intangible asset.