Sunland Company incurred the following costs during the current year in connecti

Question

Sunland 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 Sunland 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) $289,000 Materials consumed in R&D projects 56,800 Consulting fees paid to outsiders for R&D projects 128,000 Personnel costs of persons involved in R&D projects 135,000 Indirect costs reasonably allocable to R&D projects 46,800 Materials purchased for future R&D projects 33,800

Explanation / Answer

Particulars Amount To be expensed for R & D Remarks Cost of equipment acquired that will have alternative 289000.00 57800.00 Since equipment will be used for future projects, it will be capitalized and depreciated as RnD exp 289000/5 Materials consumed in R&D projects 56800.00 56800.00 Expense to RnD Consulting fees paid to outsiders for R&D projects 128000.00 128000.00 Expense to RnD Personnel costs of persons involved in R&D projects 135000.00 135000.00 Expense to RnD Indirect costs reasonably allocable to R&D projects 46800.00 46800.00 Expense to RnD Materials purchased for future R&D projects 33800.00 0.00 Since material purchased is for future, it will be coming as inventory not as expense Total 689400 424400.00

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