Question
During 2026 Ravensmere Pharma developed a new tablet-coating process. All costs were paid in cash.
- January to April: research costs of $60,000 (recorded on April 30).
- On May 1 Ravensmere could demonstrate all six IAS 38 criteria for capitalising development — technical feasibility, intention and ability to complete and use it, how it will generate future economic benefits, adequate resources, and reliable measurement.
- May to December (recorded on December 31): materials and services consumed $70,000; salaries of staff working directly on the development $55,000; training staff to operate the new process $10,000; general administration overheads $5,000.
- The process came into use on January 1, 2027 with a useful life of 5 years, amortised straight-line.
Required:
- Capitalised Amount — the development cost recognised as an intangible asset.
- Journal Entries — the April 30 and December 31, 2026 entries, and 2027 amortisation. Use Research Expense, Development Costs, Staff Training Expense, Administrative Expense, Amortisation Expense, Accumulated Amortisation - Development Costs and Cash.
Statements in this challenge
- Capitalised AmountNumeric Answer
- Journal EntriesJournal Entry
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
How to approach this
IAS 1 — Presentation of Financial Statements
A composite challenge links several statements built from one set of data, so figures flow between them: profit reaches retained earnings, and the closing balances feed the position statement. Complete them in the order the statements depend on each other rather than the order of the tabs.
Common mistakes
- Preparing each statement independently, so the linking figures disagree.
- Carrying a figure forward before finishing the adjustments that change it.
- Reworking a linked figure in one statement without updating it in the others.
Further readingIAS 1: what goes where in a full set of statements