Loazia Inc. incurred the following costs during the year ended December 31, 2015: The total amount to be classified and expensed as research and development in 2015 is
A) $635,000.
B) $935,000.
C) $665,000.
D) $365,000.

Question

Loazia Inc. incurred the following costs during the year ended December 31, 2015:  The total amount to be classified and expensed as research and development in 2015 is
A) $635,000. 
B) $935,000. 
C) $665,000. 
D) $365,000.

Quizplus · Accepted Answer

The costs to be classified and expensed as research and development are the sum of research costs, development costs, and overhead costs. Adding up the amounts for each category, we have:

Research costs = $200,000
Development costs = $400,000
Overhead costs (allocated at 25% of total R&D costs) = $65,000

Total R&D costs = $200,000 + $400,000 + $65,000 = $665,000. Therefore, the correct answer is (C) $665,000.