Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 10, Problem 10.16BE
Research and development
• LO10–8
Maxtor Technology incurred the following costs during the year related to the creation of a new type of personal computer monitor:
| Salaries | $220,000 |
| Depreciation on R&D facilities and equipment | 125,000 |
| Utilities and other direct costs incurred for the R&D facilities | 66,000 |
| Patent filing and related legal costs | 22,000 |
| Payment to another company for performing a portion of the development work | 120,000 |
| Costs of adapting the new monitor for the specific needs of a customer | 80,000 |
What amount should Maxtor report as research and development expense in its income statement?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
22
The cost of the wicketer machine is as follows:
Purchase Price
R70 000
Installation
R15 000
Staff Training
R6 500
The machine has a useful life of 10 years and management's policy is to revalue the machine
every two years from the date of purchase. The entity adopts the elimination method for
revaluations. The machine is depreciated on a straight-line basis.
An independent valuator who is a competent industry expert has determined the fair value of the
machine to be R90 000 on the 2nd anniversary of the purchase of the machine.
The Financial Director has also approved a policy that the revaluation surplus may be transferred
to retained earnings as the asset is used.
Required:
Show all current year journal entries in respect of the Wicketer Machine up until
the year ended 30 June 2022.
Journal Narrations are required.
Round all figures to the nearest Rand.
Q.1.2
b.
2,220,000
d. 3,420,0C
Problem 192 (IAA)
Metal Company incurred the following costs during the current year:
Laboratory research aimed at discovery of
New knowledge
750,000
Design of tools, jigs, molds and dies involving
New technology
220,000
Quality control during commercial production,
Including routine testing
350,000
Equipment acquired two years ago, having an estimated
useful life of five years with no residual value, used
in various R and D projects
Research and development services performed by
Stone Company for Metal Company
Research and development services performed by
Metal Company for Kaye Company
1,500,000
230,000
20,000
What amount of research and development expense should be reported in the current year?
a. 1,200,000
c. 1,870,000
b. 1,500,000
d. 2,170,000
Brief Exercise 10-7 (Algo) Patent; research and development [LO10-1, 10-8]
On March 17, Advanced Technologies purchased a patent related to laser surgery techniques. The purchase price of the patent is
$1,230,000. The patent is expected to benefit the company for the next five years. The company had the following additional costs:
$23,000 in legal fees associated with the purchase and filing of the patent, $38,000 to advertise its new laser surgery techniques, and
$48,000 to train employees. None of these additional costs were included in the purchase price or paid to the seller. Now assume that
instead of purchasing the patent, Advanced Technologies spent $1,230,000 to develop the patent internally, consisting of personnel
($815,000), equipment ($309,000), and materials ($106,000). All additional costs were incurred for the same amount.
What is the recorded cost of the patent?
> Answer is complete but not entirely correct.
Total capitalized cost
$ 2,483,000
Chapter 10 Solutions
Intermediate Accounting, 10 Ed
Ch. 10 - Prob. 10.1QCh. 10 - Prob. 10.2QCh. 10 - Prob. 10.3QCh. 10 - Prob. 10.4QCh. 10 - Prob. 10.5QCh. 10 - Prob. 10.6QCh. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9QCh. 10 - What account is credited when a company receives...
Ch. 10 - Prob. 10.11QCh. 10 - Identify the two exceptions to valuing property,...Ch. 10 - In what situations is interest capitalized?Ch. 10 - Define average accumulated expenditures and...Ch. 10 - Explain the difference between the specific...Ch. 10 - Prob. 10.16QCh. 10 - Prob. 10.17QCh. 10 - Explain the accounting treatment of costs incurred...Ch. 10 - Explain the difference in the accounting treatment...Ch. 10 - Prob. 10.20QCh. 10 - Prob. 10.21QCh. 10 - Prob. 10.22QCh. 10 - Prob. 10.23QCh. 10 - Acquisition cost; machine LO101 Beavert on Lumber...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Asset retirement obligation LO101 Refer to the...Ch. 10 - Prob. 10.6BECh. 10 - Prob. 10.8BECh. 10 - Prob. 10.11BECh. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Prob. 10.14BECh. 10 - Prob. 10.15BECh. 10 - Research and development LO108 Maxtor Technology...Ch. 10 - Prob. 10.18BECh. 10 - Prob. 10.19BECh. 10 - Research and development; various types LO108...Ch. 10 - Prob. 10.21BECh. 10 - Acquisition cost; equipment LO101 Oaktree Company...Ch. 10 - Prob. 10.3ECh. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Acquisition costs; noninterest-bearing note ...Ch. 10 - Prob. 10.11ECh. 10 - Prob. 10.14ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.16ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - FASB codification research LO101, LO106, LO107,...Ch. 10 - Prob. 10.30ECh. 10 - Prob. 10.31ECh. 10 - Prob. 10.32ECh. 10 - Intangibles; start-up costs LO101, LO108 Freitas...Ch. 10 - Prob. 10.1PCh. 10 - Prob. 10.4PCh. 10 - Acquisition costs; journal entries LO101, LO103,...Ch. 10 - Prob. 10.6PCh. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Judgment Case 101 Acquisition costs LO101, LO103,...Ch. 10 - Judgment Case 104 Interest capitalization LO107...Ch. 10 - Prob. 10.6DMPCh. 10 - Prob. 10.7DMPCh. 10 - Judgment Case 108 Research and development LO108...Ch. 10 - Prob. 10.9DMPCh. 10 - Prob. 10.11DMPCh. 10 - Prob. 10.13DMPCh. 10 - Prob. 10.15DMPCh. 10 - Prob. 10.16DMP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Brief Exercise 11-13 (Algo) Amortization; Software development costs [LO11-4] On September 30, 2024, Athens Software began developing a software program to shield personal computers from malware and spyware. Technological feasibility was established on February 28, 2025, and the program was available for release on April 30, 2025. Development costs were incurred as follows: $ September 30 through December 31, 2024 January 1 through February 28, 2025 March 1 through April 30, 2025 Athens expects a useful life of four years for the software and total revenues of $7,600,000 during that time. During 2025, revenue of $1,520,000 was recognized. Required: 1. Prepare a journal entry to record the development costs in each year of 2024 and 2025. 2. Calculate the required amortization for 2025. Complete this question by entering your answers in the tabs below. Required Required 1 2 Prepare a journal entry to record the development costs in each year of 2024 and 2025. Note: If no entry is…arrow_forwardPls answer number 13 with solutions In 20x1, EXHAUSTIVE COMPLETE Co. received a court order requiring the cleanup of environmental damages caused by one of EXHAUSTIVE’s factory. EXHAUSTIVE has no other realistic alternative but to comply with the court order. Other entities have incurred around ₱60M for similar cleanup; however, EXHAUSTIVE’s best estimate of the cost of cleanup is ₱80M. How much is the provision to be recognized? a. 60M c. 70M b. 80M d. 0arrow_forwardFIN 6020 v20f Taylor Toy Corp Ch 11 (11-9) Taylor Toy Corp. is considering the replacement of it injection molding machine. It is 2 years old but new technology has it considering the newest model. The old (current) machine was acquired 2 years ago and is being depreciated on a straight line basis over 8 years (6 years remaining).The annual depreciation expense is $350 per year, and its current book value is $2,100. It can be sold for $2,500 today. If the machine is not replaced, it is expected to be sold for $500 at the end of its remaining life (6 yrs). The new, replacement machine will cost $8,000. It is expected to be used for 6 years, and is expected to be sold for $800 then. It will be depreciated using MACRS (5-year class with 2 year convention). The new machine is expected to support an increase in sales by $1,000 per year, and with its improved electrical efficiency, it should reduce operating expenses by $1,500 per year. Inventories will need to increase by $2,000 and Account…arrow_forward
- Brief Exercise 10-5 (Static) Asset retirement obligation [LO10-1] Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.6 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $500,000, 20% probability; (2) $550,000, 45% probability, and (3) $650,000, 35% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the book value of the asset retirement liability at the end of one year? Assuming that the actual restoration costs incurred after five years are $596,000, what amount of gain or loss will Smithson recognize on retirement of the liability? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in…arrow_forwardQ3 A reactor of special design un the major item of equipment in a small chemical plant. The initial cost of a Completely installed reactor is $ 60000 to the salvage value of the end of the useful life is estimated to be $ 10000. The total annual expenses for the plant are $100000. Excluding depreciation costs for the reactor. How many years of useful life should de estimated for the reactor if 12% of the total annual expenses for the Plant are due to the cost for reactor depreciation?arrow_forwardQ3 A reactor of special design un the major item of equipment in a small chemical plant. The initial cost of a Completely installed reactor is $ 60000 to the salvage value of the end of the useful life is estimated to be $ 10000. The total annual expenses for the plant are $100000. Excluding depreciation costs for the reactor. How many years of useful life should de estimated for the reactor if 12% of the total annual expenses for the Plant are due to the cost for reactor depreciation? 1 Add File Page 2 of 2 Back Submit ever submit passwords through Google Forms.arrow_forward
- Brief Exercise 10-5 (Algo) Asset retirement obligation [LO10-1] Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.8 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $520,000, 20% probability; (2) $570,000, 35% probability; and (3) $670,000, 45% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the book value of the asset retirement liability at the end of one year? Assuming that the actual restoration costs incurred after five years are $616,000, what amount of gain or loss will Smithson recognize on retirement of the liability? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in…arrow_forwardCH 5#9 The A Corporation is considering the construction of a new plant to build a component part that it is currently purchasing. It has the following information. Item Cost Expected life Plant $20,000,000 40 years Utilities 10,000,000 20 years Equipment 15,000,000 10 years The operating costs are estimated at $5 million per year, assuming an output of 1 million units of product per year. The corporation uses a discount rate of 0.05. It can purchase the product at a cost of $10 per unit. Should the new plant be built (on a straight economic basis)?arrow_forwardQUESTION 24 Suppose the Department of Environmental Quality as part of a State Implementation Plan (SIP) would like a manufacturing facility to install a selective catalytic reduction (SCR). The costs of SCR system are: Equipment: $3,000,000 Installation: $500.000 Operation and Maintenance: $100,000/yr Catalytic inputs: $250,000/yr The benefits are: Property damage: $250,000/yr Health damages: $300,000/yr Using a 5% discount rate, what is the net-benefit of installing a SCR?arrow_forward
- Saved Problem 10-6A Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.] Onslow Co. purchases a used machine for $288,000 cash on January 2 and readies it for use the next day at a $8,000 cost. On January 3, it is installed on a required operating platform costing $1,600, and it is further readied for operations. The company predicts the machine will be used for six years and have a $34,560 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of. roblem 10-6A Part 3 Prepare journal entries to record the machine's disposal under each of the following separate assumptions: 1. Record the sale of the used machine for $21,000 cash. 2. Record the sale of the used machine for $84,000 cash. 3. Record the insurance settlement received of $31,500 resulting from the total destruction of the machine in a fire. View transaction list Journal entry…arrow_forwardQuestion 21 During year 4, King Company made the following expenditures relating to its plant building: Continuing and frequent repairs Repainted the plant building $40,000 10,000 Major improvements to the electrical wiring system 32,000 Partial replacement of roof tiles 14,000 How much should be charged to repair and maintenance expense in year 4? O $82,000 O $96,000 O $64,000 O$54,000arrow_forward6 Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate comple Problem 6-30 Mutually exclusive investments and project lives As a result of improvements in product engineering. United Automation is able to sell one of its two milling machines. Both machines perform the same function but differ in age. The newer machine could be sold today for $77.000. Its operating costs are $23,600 a year, but at the end of five years, the machine will require a $18.200 overhaul (which is tax deductible) Thereafter operating costs will be $31,800 until the machine is finally sold in year 10 for $7700 The older machine could be sold today for $26,800 if it is kept, it will need an immediate $29,000 (tax-deductible) overhaul Thereafter, operating costs will be $38,000 a year until the machine is finally sold in year 5 for $7700 Both machines are fully depreciated for tax purposes. The company pays tax at 21% Cash flows have been…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Property, Plant and Equipment (PP&E) - Introduction to PPE; Author: Gleim Accounting;https://www.youtube.com/watch?v=e_Hx-e-h9M4;License: Standard Youtube License