Question

In 2015 Happy, Inc. incurred research and development costs as follows: Materials and equipment Personnel Indirect costs $200,000 125,000 75.000 Equipment costs include equipment with a cost of $100,000 that can be used for other research projects. The equipment has an estimated life of 10 years and no salvage value. The equipment was acquired at the beginning of 2015. The equipment is to be depreciated using the straight-line basis. All cost relate to a product that will be marketed in 2016. It is estimated that these costs will be recouped by December 31, 2019. What is the amount of research and development costs that should be expensed in 2015?

Answer 1

The amount of Research and developments cost that should be expensed in 2015 Particulars Amount ($) Reasearch cost 1,00,000.00 Personnel 1,25,000.00 Indirect cost 75,000.00 The amount of research and developments cost 3,00,000.00 All the cost relate to a product that will be marketed in 2016 Particulars Material and Equipment cost Personnel Indirect cost Total Equipments Cost Less-Depreciation (400000/10years = 40000 per year) Amount ($) 2,00,000.00 1,25,000.00 75,000.00 4,00,000.00 2015 2016 - 40,000.00 -40,000.00 3,20,000.00 The estimated cost will be recomped by 31st December 2016 (Total Equipments Cost - Depreciation of 2years) It is estimated that these cost will be recomped by 31st December 2019 Particulars Amount ($) Material and Equipment cost 2,00,000.00 Personnel 1,25,000.00 Indirect cost 75,000.00 Total Equipments Cost 4,00,000.00 Less-Depreciation (400000/10years = 40000 per year) 2015 -40,000.00 2016 -40,000.00 2017| -40,000.00 2018 -40,000.00 2019 - 40,000.00 The estimated cost will be recomped by 31st December 2019 2,00,000.00 (Total Equipments Cost - Depreciation of 5years)