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Large Mart decided to develop an interactive touchscreen collaborative hub that will create shared spaces to help researchers, government and commercial customers come up with brilliant solutions. Large Mart decided to undertake this project because its IT and Engineering Department knew it had the technical and engineering expertise to develop the collaborative hub successfully. During the financial year Large Mart spent $1,500,000 in creating a prototype of the collaborative hub and its commercial customers expressed strong interest to purchase such a device. On 3^rd of May 201x Large Mart posted an announcement on its website stating that the collaborative hubs will go on sale. The Large Mart accounting department is unsure if the $1,500,000 that was spent on the prototype is regarded as a development or research cost. As a result, the accounting department is also unsure how to account for the monies spent on the creation of such a device.

Question 1a) Explain the difference between development and research expenditure and what criteria must be used to distinguish between development and research expenditures in the Australian financial accounting environment

Question 1b) Determine if the prototype of the collaborative hub represents development or research expenditure, using the criteria you have identified in question 1a, and explain how the funds spent on the prototype collaborative hub should be accounted for (you do NOT need to provide any journal entries!)