Allen Corporation reported research and development costs for 2014 of $4,000,000. Which of the following is...
Allen Corporation reported research and development costs for 2014 of $4,000,000. Which of the following is true concerning this balance?
Group of answer choices
The $4,000,000 represents research and development costs for projects which did not prove successful.
Allen had a choice between expensing the $4,000,000 or capitalizing it to an asset account and amortizing it.
The $4,000,000 represents the amount spent on all research and development for 2014.
Investors do not care how much Allen spent on research and development.
If Allen uses IFRS, the research and development expense would have been higher than $4,000,000.
Homework Answers
Solution: Allen had a choice between expensing the $4,000,000 or capitalizing it to an asset account and amortizing it.
Explanation: Under IFRS Research costs are expensed while the development costs are capitalized. Thus Allen gets a choice between expensing or capitalizing amount of $400,000 to an asset account and amortizing it.
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