D | Question 4 2 pts During its most recent accounting period, Fasenmyer company

Question

D | Question 4 2 pts During its most recent accounting period, Fasenmyer company incurred $115,000 of research costs toward creation of a new type of building material. It also incurred an additional $235,000 toward development of a production process needed to produce the new materials. Which of the following would be the appropriate accounting under US GAAP to record these expenditures? Capitalize the full $250,000 as intangible assets Recognize $115,000 as research & development expense and capitalize $235.000 as an intangible asset Recognize $250,000 as research and development expense Recognize $235,000 as research & development expense and capitalize $115.000 as an intangible asset

Explanation / Answer

As per US GAAP, the expenditure incurred during research phase has no future economic benefit that will flow to the entty,

So the expenditure incurred during research phase is required to be expensed.

The expenditure incurred during development phase has the future economic benefit that will flow to the entity.

So $115000 is required to be expensed and $235000 is required to be capitalized.

So correct answer is Recognize $115000 as research & development expense and capitalize $235000 as intangible asset.

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