Last year, Green Corporation incurred the following expenditures in the development of a new plant process: $$\begin{array} { l r }
\text { Salaries } & \$ 250,000 \
\text { Materials } & 90,000 \
\text { Utilities } & 20,000 \
\text { Quality control testing costs } & 40,000 \
\text { Management study costs } & 5,000 \
\text { Depreciation of equipment } & 18,000
\end{array}$$ During the current year, benefits from the project began being realized in May. If Green Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.

Question

Last year, Green Corporation incurred the following expenditures in the development of a new plant process: $$\begin{array} { l r } 
\text { Salaries } & \$ 250,000 \
\text { Materials } & 90,000 \
\text { Utilities } & 20,000 \
\text { Quality control testing costs } & 40,000 \
\text { Management study costs } & 5,000 \
\text { Depreciation of equipment } & 18,000
\end{array}$$ During the current year, benefits from the project began being realized in May. If Green Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.

Quizplus · Accepted Answer

The total qualifying R&D expenditures are $418,000 ($250,000 + $90,000 + $20,000 + $40,000 + $18,000). The management study costs are not included. The amortization period begins in May, so 8 months of amortization is allowed for the current year. The monthly amortization is $418,000 / 60 = $6,967. Therefore, the deduction for the current year is $6,967 * 8 = $55,733. However, the closest option is $50,400, which seems to be a mistake in the options provided.

Last Year, Green Corporation Incurred the Following Expenditures in the Development