During its first year of operation, Dovery Company incurred $355,000 of research costs undertaken with the prospect of gaining new technical understanding about a new nanotechnology procedure. An additional $495,000 was incurred to develop a production process to use that new technology to produce a new lubricant product. Under U.S. GAAP, which of the following is the appropriate accounting for these costs?
A) expense $850,000
B) expense $355,000 and capitalize $495,000 as an intangible asset
C) expense $495,000 and capitalize $355,000 as an intangible asset
D) capitalize $850,000 as an intangible asset

Question

Quizplus · Accepted Answer

Under U.S. GAAP, research and development costs are generally expensed as incurred. Therefore, both the research costs of $355,000 and the development costs of $495,000 should be expensed.

During Its First Year of Operation, Dovery Company Incurred $355,000