Question 1 - The following information is taken from the accounts of Ray Ltd.
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$000
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Motor Vehicles, 1 January 2006
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620
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Motor Vehicles, 31 December 2006
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740
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Accumulated Depreciation - Motor Vehicles, 1 January 2006
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230
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Accumulated Depreciation - Motor Vehicles, 31 December 2006
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290
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Depreciation Expense - Motor Vehicles, year ended 31 December 2006
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150
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Gain on sale of motor vehicle, year ended 31 December 2006
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10
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Cost price of motor vehicles sold during the year
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130
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Required: By using relevant t-account(s),
(a) Calculate the cash proceeds from sale of Motor Vehicle?
(b) Calculate the cash paid for the purchase of a new Motor Vehicle.
Question 2 - Tuneln Pty Ltd produces headphones using cutting edge technology. In 2010, the company started a new research and development program that finished at the end of 2011. Employees have a duty to maintain confidentiality. The following costs had been incurred:
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Costs
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2010
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2011
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Obtaining knowledge
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$90,000
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Finding suitable material
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$140,000
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Building pre-production prototype
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$56,000
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Testing the prototype
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$30,000
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Projected Related Wages
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$46,000
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$59,000
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Advertising costs
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$5,000
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At the very beginning of 2011, the project had a significant breakthrough that finally caused the management to believe that all the costs of the project could be recouped in the future. Tuneln Pry Ltd's financial year end is 31 December.
a) How much of the costs over the life of the project can be capitalised and recognized as assets (write "Zero" if no asset can be recognised)?
b) How much of the costs over the life of the project must be expensed (write "Zero" if nothing must be expensed)?