Janson Pharmaceuticals incurred the following costs in 2018 related to a new can

Question

Janson Pharmaceuticals incurred the following costs in 2018 related to a new cancer drug:

The development costs were incurred after technological and commercial feasibility was established and after the future economic benefits were deemed probable. The project was successfully completed and the new drug was patented before the end of the 2018 fiscal year.

Required:
1. Calculate the amount of research and development expense Janson should report in its 2018 income statement related to this project.
2. Calculate the amount of research and development expense Janson should report in its 2018 income statement related to this project. Assuming that Janson prepares its financial statements according to International Financial Reporting Standards.

Research for new formulas $ 2,495,000 Development of a new formula 1,670,000 Legal and filing fees for a patent for the new formula 67,000 Total $ 4,232,000

Explanation / Answer

1

Calculate the amount of research and development expense Janson should report in its 2018 income statement related to this project.

Answer:

Jonson should report following of research and development expense in its 2018 income statement related to this project according to the US G.A.A.P

Research for new formulas

2495000

Development of a new formula

1670000

Total

4165000

Note:

here Legal fees will be capitalized as intangible assets

So Jonson should report the research and development expense in its 2018 income statement related to this project =$4,165,000

__________________________________________________________________________

2

Calculate the amount of research and development expense Janson should report in its 2018 income statement related to this project. Assuming that Janson prepares its financial statements according to International Financial Reporting Standards.

Answer:

According to International Financial Reporting Standards (IFRS) only Research for new formulas of 2,495,000 cost will be expanses as research and development expense(R&D)

The other two cost of Development of a new formula and Legal fees will be capitalized as intangible assets

Research for new formulas

2495000

Development of a new formula

1670000

Total

4165000

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