Discoveries Ltd. (DL) is involved in research and development related to new processes to make manufacturing more
Question:
Discoveries Ltd. (DL) is involved in research and development related to new processes to make manufacturing more efficient and environmentally friendly. The company has been working on a number of new projects for the past three years. On 31 October 20X5, the company was able to demonstrate the feasibility and potential markets for its latest project. In fact, it has a client that has already indicated it will purchase the technology for use in its manufacturing process when work is completed. DL has a 31 December year end. It has incurred the following expenditures for this project:
Research costs expensed in 20X2 to 20X5 ............................................... $4,400,000
Development costs incurred prior 31 Oct. 20X5 ..................................... 3,600,000
Development costs incurred 31 Oct. to 31 Dec. 20X5 ............................ 2,400,000
Advertising costs to launch new product ................................................ 1,600,000
Required:
1. Indicate how each expenditure should be accounted for and why.
2. How would your answer be different if there was no potential interest in the product at this time?
Step by Step Answer:
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick