Pharoah Company incurred the following costs during the current year in connecti

Question

Pharoah Company incurred the following costs during the current year in connection with its research and development activities.

Compute the amount to be reported as research and development expense by Pharoah on its current year income statement. Assume equipment is purchased at the beginning of the year.

Cost of equipment acquired that will have alternative    uses in future R&D projects over the next 5 years    (uses straight-line depreciation) $282,500 Materials consumed in R&D projects 55,500 Consulting fees paid to outsiders for R&D projects 115,000 Personnel costs of persons involved in R&D projects 125,000 Indirect costs reasonably allocable to R&D projects 45,500 Materials purchased for future R&D projects 32,500

Explanation / Answer

cost of equipment (282,500/5)= 56500 Materials consumed in R&D projects 55,500 cosulting fees to outsiders 115,000 personnel cost of persons involved 125,000 indirect costs reasonable allocable to R&D projects 32,500 total to be expensed for Research & development 384500

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