1. Koby Co Ltd is involved in the research and development of a new type of three-finned surfboard. For this R & D it has incurred the following expenditure:

• $60,000 obtaining a general understanding of water-flow dynamics
• $30,000 on understanding what local surfers expect from a surfboard
• $80,000 on testing and refining a certain type of fin
• $150,000 on developing and testing a full prototype of the three-finned board, to be called the trident.

There is expected to be a very large market for the product, which will generate many millions of dollars in revenue.

Required:

As per AASB 138 Intangible Assets, determine the correct accounting treatment for each of the above expenditure as:

1. research costs or development costs, and
2. expensed or capitalised. (4 marks)