1. Accounting for R & D Costs
Martinez Company incurred the following costs during 2010 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). $330,000
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 reasonable allocable to R & D projects 50,000
Materials purchased for future R & D projects 34,000
Compute the amount to be reported as research and development expense by Martinez on its income statement for 2010. Assume equipment is purchased at beginning of year.
This solution illustrates how to account for various expenses related to research and development.