Question 4.3

During the year ended 31 December 20X0, Innovation plc incurred 900,000 in developing a new miniature electronic tagging security device called Minitag. The product will be launched at the start of 20X1 and annual sales for the next three years are expected to be 600,000, 450,000 and 300,000 respectively. At the end of this time a new device will have totally replaced the current model.

REQUIRED:

1. Suggest three different ways in which Innovation plc could treat the costs of developing Minitag, calculating the amount(s) to be charged to the Statement of Profit or Loss in each year.

1. Outline the advantages and disadvantages of each alternative.