Question

Van Beek Company incurred the following costs during the year: Research and development costs $112,000 Patent 27,000 Trademark 33,000 Marketing costs 40,000 Copyright 62,750 How much of these costs should be capitalized?

Select one:
a. $122,750
b. $264,750
c. $224,750
d. $172,750

Answer 1

The costs to be capitalized by Van Beek Company are $122,750, which includes the costs for the patent and trademark. R&D, marketing, and copyright costs are typically expensed as they are incurred and not capitalized.

Step-by-step explanation:

The amount of costs that should be capitalized by Van Beek Company is $122,750. This includes the expenses for the patent and trademark, which are typically considered capitalizable intangible assets. Research and development (R&D) costs, marketing costs, and copyright fees are generally expensed as incurred, and therefore should not be capitalized.

Capitalization of expenses is an accounting practice where costs to acquire assets that provide future economic benefits are recorded on the balance sheet instead of being expensed. In the case of Van Beek Company, the patent cost of $27,000 and the trademark cost of $33,000 meet the criteria for capitalization. The research and development costs, even though they are substantial, should be expensed as they are incurred, unless there is a tangible asset being developed that can be directly attributed to the R&D costs. Similarly, marketing costs and copyright fees should be treated as current expenses and not capitalized.

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