Choice "B" is correct. Research and development expenses would include the following: Laboratory research aimed at discovery of new knowledge | $ 75,000 | | Design of tools, jigs, molds, and dies involving new technology | 22,000 | | Equipment acquired two years ago, having an estimated useful life of five years with no salvage value, used in various R&D projects | 30,000 | (150,000 / 5) | Research and development services performed by Stone Co. for Metal Inc. | 23,000 | | Total amount of research and development expenditures reported in the current year income statement by Metal Inc. | $ 150,000 | |
Choice "a" is incorrect. Depreciation on equipment used in various R&D projects would be included as a research and development expenditure.Choice "d" is incorrect. Quality control during commercial production, including routine testing in the amount of $35,000 is not a permitted research and development expenditure. Additionally, research and development services performed by Metal Inc. for Clay Co. in the amount of $32,000 is not a permitted research and development expenditure. Finally, depreciation expense in the amount of $30,000 ($150,000 / 5) would be included in the current year as a research and development expenditure.Choice "c" is incorrect. The amount of $217,000 includes expenditures that are not allowed as research and development expenditures, such as quality control during commercial production, including routine testing in the amount of $35,000, and research and development services performed by Metal Inc. for Clay Co. in the amount of $32,000. |
