A company incurred the following costs related to research and development for t

Question

A company incurred the following costs related to research and development for the current year:

The equipment will be used in other projects. Depreciation in the current year is $70,000. For what amount should the company report research and development expense?

$1,200,000.

$430,000.

$670,000.

$590,000.

R&D salaries $ 120,000 R&D supplies consumed 240,000 Equipment used in R&D projects 600,000 Payment for services to others for R&D projects 160,000 Purchase of in-process R&D in a business acquisition 80,000

Explanation / Answer

The Answer is $1,200,000.

Reason

If any of the recognition criteria are not met then the expenditure must be charged to the income statement as incurred. Note that if the recognition criteria have been met, capitalisation must take place.

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