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Question: (Accounting for R&D Costs) More Company incurred the following costs during the current year in connection with its research and development activities.

Cost of equipment acquired that will have alternative uses in future R&D projects over the next 5 years (uses straight-line depreciation)	$280,000
Materials consumed in R&D projects	59,000
Consulting fees paid to outsiders for R&D projects	100,000
Personnel costs of persons involved in R&D projects	128,000
Indirect costs reasonably allocable to R&D projects	50,000
Materials purchased for future R&D projects	34,000

Instructions

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

Step by step solution

01

Meaning of R&D Cost 

R&D is the process through which a corporation seeks out fresh information that it can use to produce new technologies, goods, services, or systems that it can use or sell. Adding to the company's bottom line is frequently the aim.

02

Computing the amount to be reported as research and development expense by More Company on its current year income statement

Depreciation of equipment acquired that will have alternate uses in future research and development projects over the next 5 years	$56,000
Materials consumed in research and development projects	59,000
Consulting fees paid to outsiders for research and development projects	100,000
Personnel costs of persons involved in research and development projects	128,000
Indirect costs reasonably allocable to research and development projects	50,000
Total to be expensed for research and development	$393,000

Note: Materials purchased for future R&D projects should be reported as an asset.

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