Exercise 12-17 Wildhorse Company incurred the following costs during the current

Question

Exercise 12-17

Wildhorse Company incurred the following costs during the current year in connection with its research and development activities.

Compute the amount to be reported as research and development expense by Wildhorse on its current year income statement. Assume equipment is purchased at the beginning of the year.

Cost of equipment acquired that will have alternative    uses in future R&D projects over the next 5 years    (uses straight-line depreciation) $285,000 Materials consumed in R&D projects 56,000 Consulting fees paid to outsiders for R&D projects 120,000 Personnel costs of persons involved in R&D projects 121,000 Indirect costs reasonably allocable to R&D projects 46,000 Materials purchased for future R&D projects 33,000

Explanation / Answer

Cost of equipment acquired that will have alternative uses in future R & D projects over the next 5 years (uses straight-line depreciation). 285000 Since it will be used for future projects, it will be capitalized and depreciated as R & D Expense 57000 Materials consumed in R&D projects Expense immediately to R & D. 56000 Consulting fees paid to outsiders for R&D projects Expense immediately to R & D. 120000 Personnel costs of persons involved in R&D projects Expense immediately to R & D. 121000 Indirect costs reasonably allocable to R&D projects Expense immediately to R & D. 46000 Materials purchased for future R&D projects It assumed that materials have not been used yet. So they would just be included as inventory 0 Total to be expensed for research and Development 400000

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