Aspen, Inc. developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with their own research, Aspen decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments?

Question

Quizplus · Accepted Answer

The purchase of the patent for $350,000 is recorded as an asset, as it provides a future economic benefit to the company. Therefore, the total assets will be $350,000. The previous research and development costs of $250,000 are expensed and are not considered an asset since they did not result in a patent or other identifiable and separable asset. Therefore, the total expenses will be $250,000.