D is corrent. The requirement is to determine the amount that Stam should recognize as research and development (R&D). ASC Topic 730 requires equipment purchased for current and future periods to be allocated to the periods in which the assets are used. Therefore, $20,000 ($100,000/5) would be allocated to the current year. Equipment purchased for current research and development projects should be expensed as R&D. Research and development salaries, and material and labor costs for prototype products are also classified as R&D and expensed. Legal fees to obtain a patent are not considered part of R&D. Therefore, the total R&D at year-end is equal to $1,220,000 ($20,000 + $200,000 + $400,000 + $600,000).
A is incorrect. ASC Topic 730 requires equipment purchased for current and future periods to be allocated to the periods in which the assets are used. Therefore, $20,000 ($100,000/5) would be allocated to the current year. Equipment purchased for current research and development projects should be expensed as R&D. Research and development salaries, and material and labor costs for prototype products are also classified as R&D and expensed. Legal fees to obtain a patent are not considered part of R&D. Therefore, the total R&D at year-end is equal to $1,220,000 ($20,000 + $200,000 + $400,000 + $600,000).
A is incorrect. ASC Topic 730 requires equipment purchased for current and future periods to be allocated to the periods in which the assets are used. Therefore, $20,000 ($100,000/5) would be allocated to the current year. Equipment purchased for current research and development projects should be expensed as R&D. Research and development salaries, and material and labor costs for prototype products are also classified as R&D and expensed. Legal fees to obtain a patent are not considered part of R&D. Therefore, the total R&D at year-end is equal to $1,220,000 ($20,000 + $200,000 + $400,000 + $600,000).
A is incorrect. ASC Topic 730 requires equipment purchased for current and future periods to be allocated to the periods in which the assets are used. Therefore, $20,000 ($100,000/5) would be allocated to the current year. Equipment purchased for current research and development projects should be expensed as R&D. Research and development salaries, and material and labor costs for prototype products are also classified as R&D and expensed. Legal fees to obtain a patent are not considered part of R&D. Therefore, the total R&D at year-end is equal to $1,220,000 ($20,000 + $200,000 + $400,000 + $600,000).
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