Question

In 2025, Edwards Corporation incurred research and development costs as follows: materials and equipment $110,000, personnel $130,000, indirect costs $170,000, totaling $410,000. These costs relate to a product that will be marketed in 2027. It is estimated that these costs will be recouped by December 31, 2028. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2025?

a) $380,000
b) $280,000
c) $300,000
d) $410,000

Answer 1

The amount of research and development (R&D) costs that should be expensed in 2025 is $300,000.

Step-by-step explanation:

The amount of research and development (R&D) costs that should be expensed in 2025 is $300,000.

The total R&D costs incurred by Edwards Corporation in 2025 is $410,000. However, only the costs directly related to the product that will be marketed in 2027 should be capitalized. These costs include materials and equipment, personnel, and indirect costs, totaling $300,000 ($110,000 + $130,000 + $170,000).

The remaining costs that are not directly related to the product should be expensed in 2025, which is $110,000 ($410,000 - $300,000).