Black Motors, Ltd. recently entered the automobile industry by introducing its first fully electric vehicle, the Bolt. The Bolt is the first of many planned vehicles Black will produce. In order to expand its product line, Black requires a state-of-the-art testing facility and a new research and development laboratory

Assume that Black Motors, Ltd. reports under IFRS. Assume all the conditions to capitalize development costs have been met. Any development costs are amortized over 3 years..

Requirement a. Prepare the journal entries to record each of the transactions, assuming all purchases were made with cash. Assume the transactions occurred on January 1.

Black Motors, Ltd. recently entered the automobile industry by introducing its first fully electric vehicle, the Bolt. The Bolt is the first of many planned vehicles Black will produce. In order to expand its product line, Black requires a state-of-the-art testing facility and a new research and development laboratory. Assume that Black Motors, Ltd. reports under IFRS. Assume all the conditions to capitalize development costs have been met. Any development costs are amortized over 3 years..

Requirement a. Prepare the journal entries to record each of the transactions, assuming all purchases were made with cash. Assume the transactions occurred on January 1.

Constructed a new testing facility at a cost of $12,500,000. The facility is estimated to have a 20-year economic life and a $4,500,000 residual value at the end of that time. The facility will be depreciated using the straight-line method.

Purchased R&D equipment for $550,000.The equipment has a 5-year life and no residual value. The equipment will be depreciated using the straight-line method.

Acquired testing materials and supplies at a cost of $90,000. Research projects consumed 80% of the materials and supplies in the current year.

Developed a prototype for a new battery called the Powerizer. The prototype cost $237,000 for development and testing.

Paid $155,800 in salaries and wages for testing activities.

Obtained a patent for the Powerizer. The patent application and legal fees to successfully defend the patent amounted to $595,000. The economic life of the patent is 7 years.

Acquired Clipper Automotive Suppliers, Inc. at the beginning of the current year. As part of the transaction,
Black acquired in-process R&D for $391,200. Subsequent R&D expenditures for these projects amounted to $150,000. The acquired projects continue in development for 2 more years.

Recorded all required depreciation and amortization at the end of the year.

Requirement b. Indicate the effects of these transactions on the current year-end balance sheet (excluding the effects on the cash balance), income statement, and cash flow statement under the direct and indirect methods.

First indicate the effects of these transactions on the balance sheet (ignore cash effects) and income statement. (If an input field is not used in the table, leave the field empty; do not select a label. Abbreviations Used: LT = Long-term.)

Review the journal entries for transactions 1 - 8.

Transaction

Income Statement

Balance Sheet

1

2

3

4

5

6

7

8

Now indicate the effects of these transactions on the cash flow statement under the direct and indirect methods. When considering the effect on the statement of cash flow, consider only items that are separately stated on the cash flow statement (exclude items considered in the calculation of net income). (If an input field is not used in the table, leave the field empty; do not select a label. If there is no effect on the financial statement, select the applicable "No effect" response and leave all remaining fields blank. Abbreviations Used: NC = Noncash, NCIF = Noncash Investing and financing activities. OA = Operating activities, IA = Investing activities, FA = Financing activities.)

Review the journal entries for transactions 1 - 8.

Cash Flow Statement

Transaction

Direct

Indirect

1

2

3

4

5

6

7

8

Requirement c.
Black determined their research and development expense and amortization expense to be

$1,124,800 and $85,000, respectively under U.S. GAAP. What is the difference between the research and development expense under U.S. GAAP compared to IFRS?

Begin by computing the research and development and amortization expense under IFRS.

U.S. GAAP

IFRS

Research and development expense

$1,124,800

Amortization expense

$85,000

Question

Black ​Motors, Ltd. recently entered the automobile industry by introducing its first fully electric​ vehicle, the Bolt. The Bolt is the first of many planned vehicles Black will produce. In order to expand its product​ line, Black requires a​ state-of-the-art testing facility and a new research and development laboratoryAssume that Black Motors, Ltd. reports under IFRS. Assume all the conditions to capitalize development costs have been met. Any development costs are amortized over 3 years.. Requirement a. Prepare the journal entries to record each of the​ transactions, assuming all purchases were made with cash. Assume the transactions occurred on January 1.Black ​Motors, Ltd. recently entered the automobile industry by introducing its first fully electric​ vehicle, the Bolt. The Bolt is the first of many planned vehicles Black will produce. In order to expand its product​ line, Black requires a​ state-of-the-art testing facility and a new research and development laboratory. Assume that Black Motors, Ltd. reports under IFRS. Assume all the conditions to capitalize development costs have been met. Any development costs are amortized over 3 years.. Requirement a. Prepare the journal entries to record each of the​ transactions, assuming all purchases were made with cash. Assume the transactions occurred on January 1.Constructed a new testing facility at a cost of $12,500,000. The facility is estimated to have a​ 20-year economic life and a $4,500,000 residual value at the end of that time. The facility will be depreciated using the​ straight-line method. Purchased​ R&D equipment for $550,000.The equipment has a​ 5-year life and no residual value. The equipment will be depreciated using the​ straight-line method.Acquired testing materials and supplies at a cost of $90,000. Research projects consumed 80​% of the materials and supplies in the current year.Developed a prototype for a new battery called the Powerizer. The prototype cost $237,000 for development and testing.Paid $155,800 in salaries and wages for testing activities.Obtained a patent for the Powerizer. The patent application and legal fees to successfully defend the patent amounted to $595,000. The economic life of the patent is 7 years.Acquired Clipper Automotive​ Suppliers, Inc. at the beginning of the current year. As part of the​ transaction,Black acquired​ in-process R&D for $391,200. Subsequent​ R&D expenditures for these projects amounted to $150,000. The acquired projects continue in development for 2 more years.Recorded all required depreciation and amortization at the end of the year.Requirement b. Indicate the effects of these transactions on the current​ year-end balance sheet​ (excluding the effects on the cash​ balance), income​ statement, and cash flow statement under the direct and indirect methods. First indicate the effects of these transactions on the balance sheet​ (ignore cash​ effects) and income statement.​ (If an input field is not used in the​ table, leave the field​ empty; do not select a label. Abbreviations​ Used: LT​ = Long-term.)Review the journal entries for transactions 1 - 8. TransactionIncome StatementBalance Sheet1     2     3     4     5     6     7     8      Now indicate the effects of these transactions on the cash flow statement under the direct and indirect methods. When considering the effect on the statement of cash​ flow, consider only items that are separately stated on the cash flow statement​ (exclude items considered in the calculation of net​ income). ​(If an input field is not used in the​ table, leave the field​ empty; do not select a label. If there is no effect on the financial​ statement, select the applicable​ &#34;No effect&#34; response and leave all remaining fields blank. Abbreviations​ Used: NC​ = Noncash, NCIF​ = Noncash Investing and financing activities. OA​ = Operating​ activities, IA​ = Investing​ activities, FA​ = Financing​ activities.)  Review the journal entries for transactions 1 - 8.  Cash Flow StatementTransactionDirectIndirect1     2     3     4     5     6     7     8      Requirement c.Black determined their research and development expense and amortization expense to be$1,124,800 and $85,000​, respectively under U.S. GAAP. What is the difference between the research and development expense under U.S. GAAP compared to​ IFRS? Begin by computing the research and development and amortization expense under IFRS.  U.S. GAAPIFRSResearch and development expense$1,124,800 Amortization expense$85,000

Accepted Answer

Journal Entries on January 1:

S.No
Particulars
LF
Debit
Credit

1
Testing Facility…

Transaction	Income Statement	Balance Sheet
1

2

3

4

5

6

7

8

	Cash Flow Statement
Transaction	Direct	Indirect
1

2

3

4

5

6

7

8

	U.S. GAAP	IFRS
Research and development expense	$1,124,800
Amortization expense	$85,000

Requirement b. Indicate the effects of these transactions on the current​ year-end balance sheet​ (excluding the effects on the cash​ balance), income​ statement, and cash flow statement under the direct and indirect methods.

Requirement b. Indicate the effects of these transactions on the current year-end balance sheet (excluding the effects on the cash balance), income statement, and cash flow statement under the direct and indirect methods.