Question

Loazia Inc. incurred the following costs during the year ended December 31, 2018: Laboratory research aimed at discovery of new knowledge $270,000 Costs of testing prototype and design modifications 75,000 Quality control during commercial production, including routine testing of products 270,000 Construction of research facilities having an estimated useful life of 6 years but no alternative future use 360,000 The total amount to be classified and expensed as research and development in 2018 is a. $675,000. b. $975,000. c. $705,000. d. $405,000.

Answer 1

Option (C) is correct.

Step-by-step explanation:

Given that,

Laboratory research = $270,000

cost of testing prototype = $75,000

construction of research facility = 360,000

The total amount to be classified and expensed as research and development in 2018:

= Laboratory research + cost of testing prototype + construction of research facility

= $270,000 + $75,000 + 360,000

= $705,000