Question

Western Company incurred the following costs during the year related to the creation of a new product:

Salaries of researchers
100,000
Depreciation on R D equipment30,000
Utilities at R D facility
5,000
Patent filing and legal costs8,000
Payment for services in connection with R D activities
10,000
Adaptation costs for specific needs of a customer2,000

What amount should Western report as research and development expense in its income statement?
1) $115,000
2) $147,000
3) $155,000
4) $153,000
5) $145,000

Answer 1

The amount that Western Company should report as research and development expense in its income statement is $145,000.

Step-by-step explanation:

The amount that Western Company should report as research and development expense in its income statement is $145,000.

To calculate the research and development expense, we need to include all costs directly related to the creation of a new product. The costs that should be included are salaries of researchers, depreciation on R&D equipment, utilities at R&D facility, patent filing and legal costs, and payment for services in connection with R&D activities. The adaptation costs for specific needs of a customer should not be included in the research and development expense.

So the total research and development expense is $100,000 + $30,000 + $5,000 + $8,000 + $10,000 = $153,000. The correct answer is none of the options provided. It should be $153,000.