Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2021, the company expends €325,000 on a research project, but by the end of 2021 it is impossible to determine whether any benefit will be derived from it. 

Instructions

a. What account should be charged for the €325,000, and how should it be shown in the financial statements?

b. The project is completed in 2022, and a successful patent is obtained. The development costs to complete the project are €110,000 (€36,000 of these costs were incurred after achieving economic viability). Additional administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2022 total €24,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2022.

c. Additional engineering and consulting costs incurred in 2023 required to advance the design of a product to the manufacturing stage total €60,000. These costs enhance the design of the product considerably, but it is highly uncertain if there will be a market for the new version of the product (it has not achieved economic viability). Discuss the proper accounting treatment for this cost.