Consider the following information from a company's records for 2020: Materials used in research and development projects Equipment acquired that will have alternative future uses in future R&D projects for five years Personnel costs of employees involved in R&D projects Consulting fees paid to outsiders for R&D projects Indirect costs reasonably allocable to R&D projects Legal fees associated with registration of a patent resulting from a 2020 R&D project Required: a. b. $4,500 1,500 5,500 2,800 260 2,400 Compute the amount of R&D costs that should be classified as expenses in determining 2020 net income. For any listed item not included in your answer to requirement 1. provide the rationale for not expensing it.

Consider the following information from a company's records for 2020: Materials used in research and development projects Equipment acquired that will have alternative future uses in future R&D projects for five years Personnel costs of employees involved in R&D projects Consulting fees paid to outsiders for R&D projects Indirect costs reasonably allocable to R&D projects Legal fees associated with registration of a patent resulting from a 2020 R&D project Required: a. b. $4,500 1,500 5,500 2,800 260 2,400 Compute the amount of R&D costs that should be classified as expenses in determining 2020 net income. For any listed item not included in your answer to requirement 1. provide the rationale for not expensing it.

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter7: Deductions And Losses: Certain Business Expenses And Losses

Section: Chapter Questions

Problem 40P

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Consider the following information from a company's records for 2020: Materials used in research and development projects $4,500 Equipment acquired that will have alternative future uses in future R&D projects for five years 1,500 Personnel costs of employees involved in R&D projects 5,500 Consulting fees paid to outsiders for R&D projects 2,800 Indirect costs reasonably allocable to R&D projects 250 Legal fees associated with registration of a patent resulting from a 2020 R&D project 2,500 Required: Compute the amount of R&D costs that should be classified as expenses In determining 2020 net income.
Consider the following information from a company's records for 2020: Materials used in research and development projects $4,500 Equipment acquired that will have alternative future uses in future R&D projects for five years 1,500 Personnel costs of employees involved in R&D projects 5,500 Consulting fees paid to outsiders for R&D projects 2,800 Indirect costs reasonably allocable to R&D projects 250 Legal fees associated with registration of a patent resulting from a 2020 R&D project 2,500 Required:Compute the amount of R&D costs that should be classified as expenses in determining 2020 net income. $ _______
At December 31, 2020, Green company had three existing patents shown below: Date Acquired Cost Useful life Patent A February 14, 2016 P 150,000 8 years Patent B January 3, 2019 210,250 10 years Patent C July 1, 2019 72,000 5 years During 2021, the company had the following transactions and assessments: Due to the emerging competition relating to the product being manufactured in Patent A, it is expected that the right will be useful only in 2021 and 2022. Patent B is believe to be uniquely useful as long as the company retains the right to use it. On June 1, 2021, the company unsuccessfully attempted to defend its right to Patent C. Legal fees of P15,000 was incurred in this action. The asset was immediately derecognized in the accounts. The company’s policy is to take full year amortization in the year of acquisition and no amortization in the year of derecognition using straight-line method. How…
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Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020: Asset Office furniture Machinery Cost $ 260,000 1,582,000 62,000 Used delivery truck* *Not considered a luxury automobile. Date Placed in Service 02/03/2020 07/22/2020 08/17/2020 During 2020, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2021 to increase its production capacity. These are the assets acquired during 2021: Asset Computers and information system Luxury autot Assembly equipment Storage building †Used 100% for business purposes. Karane generated taxable income in 2021 of $1,760,000 for purposes of computing the §179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as…
Price Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2019, the company expends $325,000 on a research project, but by the end of 2019 it is impossible to determine whether any benefit will be derived from it. What account should be charged for the $325,000, and how should it be shown in the financial statements? Additional engineering and consulting costs incurred in 2021 required to advance the design of a product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably. Discuss the proper accounting treatment for this cost.
In early February 2020, Bridgeport Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2020 expenditures relate to the addition: Feb. 1 Mar. 1 July 1 Dec. 1 Dec. 31 Payment #1 to contractor Payment to architect Payment #2 to contractor Payment #3 to contractor Asset carrying amount $168,000 21,000 64,400 177,000 Amount of interest $ $430,400 On February 1, Bridgeport issued a $102,000, three-year note payable at a rate of 11% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below: Other Debt Instruments Outstanding-2020 9%, 15-year bonds, issued May 1, 2005, matured May 1, 2020 6%, 10-year bonds, issued June 15, 2014 6%, 12-year bonds, issued May 1, 2020 Principal amount $303,000 $500,000 $303,000 What amount of interest should be capitalized for the fiscal year ending…