Question

Maxtor Technology incurred the following costs during the year related to the creation of a new type of personal computer monitor Salaries Depreciation on R&D facilities and equipment utilities and other direct costs incurred for the ASD Facilities Patent filing and related Leal costs Payment to another company for performing portion of the development Costs of adapting the new monitor for the edific needs of customer 2009 What amount should Maxtor report as research and development expertise in its income statement?

Answer 1

$370,000 $200,000 $81,000 $195,000 $846,000 Salaries Depreciation on R&D facilities and equipment Utilities and other direct costs incurred for the R&D facilities Payment to another company for performing a portion of the development work Amount that Maxtor should report as research and development expense in its income statement Explanation: Patent filing and related legal costs and Costs of adapting the new monitor for the specific needs of a customer are not reported as research and development expenses on income statement because an expense is qualified to be called as research and development expense if such expense is incurred for researching and developing firm's final products or services that the firm proposes to deal with or deals with currently. In simple words, the research and development expenses are incurred to gain some new knowledge about products or services that the firm proposes to deal with or currently deals with. These costs are incurred with the objective of innovating and implementing new ideas to firm's existing products or services, in general.