Crane 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) $291,500 Materials consumed in R&D projects 57,300 Consulting fees paid to outsiders for R&D projects 133,000 Personnel costs of persons involved in R&D projects 138,500 Indirect costs reasonably allocable to R&D projects 47,300 Materials purchased for future R&D projects 34,300 Compute the amount to be reported as research and development expense by Crane on its current year income statement. Assume equipment is purchased at the beginning of the year. Total to be expensed for research and Development $enter the total dollar amount to be expensed as research and development
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Crane 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 |
$291,500 | |
| Materials consumed in R&D projects | 57,300 | |
| Consulting fees paid to outsiders for R&D projects | 133,000 | |
| Personnel costs of persons involved in R&D projects | 138,500 | |
| Indirect costs reasonably allocable to R&D projects | 47,300 | |
| Materials purchased for future R&D projects | 34,300 |
Compute the amount to be reported as research and development expense by Crane on its current year income statement. Assume equipment is purchased at the beginning of the year.
| Total to be expensed for research and Development |
$enter the total dollar amount to be expensed as research and development
|
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