Research and development
Not what you're looking for?
During 2006, ABC Co purchased a building site for its proposed research and development laboratory at a cost of $60,000. Construction of the building was started in 2005. The building was completed on December 31, 2006, at a cost of $280,000 and was placed in service January 2, 2007. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated salvage value.
Management estimates that about 50% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and the direct costs incurred in conjunction with the research and development activities for 2007 appears below.
Number Salaries & Other expenses
Completed projects with of projects employee (excluding
buildingdep
long-term benefits benefits charges)
15 $90,000 $50,000
Abandoned projects or projects
that benefit the current period
10 65,000 15,000
Projects in process-
results indeterminate 5 40,000 12,000
Total 30 195,000 77,000
Upon recommendation of the research and development group, Florence Nightingale Tool Company acquired a patent for manufacturing rights at a cost of $80,000. The patent was acquired on April 1, 2006, and has an economic life of 10 years.
Instruction
If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements?
A.) The company's income statement for 2007?
B.) The company's balance sheet as of December 31, 2007.
Be sure to give account title and amounts, and briefly justify your presentation.
Purchase this Solution
Solution Summary
The solution explains how the research and development items would be presented in the income statement and the balance sheet
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.