Company XY operates in the pharmaceutical industry. From January 01, 2013 until May 30, 2013, research costs of 15,000 are incurred for a new research project. On the basis of the research results, XY starts developing a new medicine for the treatment of a new influenza virus on June 01, 2013. The company has sufficient funds to complete the project. It also implements a cost system to track all expenditures. On November 30, 2013, XY receives market approval for the new medicine. On December 01, 2013, commercial production of the medicine begins.

From June 01, 2013 until November 30, 2013, development costs of 27,000 are incurred. This amount does not include the following costs because XY is not sure how to treat them:

	June 01, 2013 until November 30, 2013	December 2013
Administrative costs for the project management	3,000
Allocation of general administrative costs	3,000
Additional cost for improving the medicine		10,000
Costs of an advertising campaign for the new medicine		7,000

1. Assess which of the expenditure mentioned above should be recognized as an expense and which should be capitalized as of December 31, 2013. Justify your answer.

2. Prepare the entries for 2013.