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Leontyne Price Co from time to time embarks on a research program when a special project

E12-16 (Accounting for R&D Costs)       
Leontyne Price Co. from time to time embarks on a research program when a special project seems to offer possibilities. In 2006 the company expends $325,000 on a research project, but by the end of 2006 it is impossible determine whether any benefit will be derived from it.       

Instructions:       
(a) What account should be charged for the $325,000 and how should it be shown in the financial statements.      


(b) The project is completed in 2007, and a successful paentis obtained. The R&D costs to complete the project are $110,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2007 total $16,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patentamortization (full year) in2007.      

(c.) In 2008, the company successful defends the patent in extended litigation at acost of $47,200, there by extending the patent life to December 31,2015. What is the proper way to account for this cost? Also, recored patent amortization (full year) in 2008.      


(d) Additional engineering and consulting costs incurred in2008 required to advance the design of a product to them anufacturing stage total $60,000. These costs enhance the design of the product considerably. Discus the proper accounting treatment for this cost.

May 04 2018 Read more Less More

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