Question $4$

During $2022$ Gosforth Ltd incurred the following expenditures on

research and development activities:

$(1)30,000$ on investigating research methods of extracting raw

materials $x-A,x-B$ and $x-C$ from mines.

$(2)$ After the technical viability of using material X$-$B to develop a

new medicine $Y$ had been proved, $150,000$ was spent on the

development process.

Commercial production and sales of medicine $Y$ commenced on

$1$ April $2022$ and are expected to produce steady profitable

income during a $10-$year period before being replaced.

Adequate resources exist to achieve this. No commercial uses

have been discovered for materials X$-$A and X$-$C$.$

REQUIRED:

a$)$ Discuss how the above two expenditures on research and

development activities should be treated according to IAS $38.$

$(2$ marks$)$

b$)$ Calculate the amount of the development expenditure that

should be carried forward at $31$ December $2023?$

$(2$ marks$)$