Question

Sunland Company incurred the following costs during the current year in connection with its research and development activities.

Cost of equipment acquired that will have alternative
uses in future R&D projects over the next 5 years (uses straight-line depreciation) $283,500
Materials consumed in R&D projects 55,700
Consulting fees paid to outsiders for R&D projects 117,000
Personnel costs of persons involved in R&D projects 137,500
Indirect costs reasonably allocable to R&D projects 45,700
Materials purchased for future R&D projects 32,700

Required:
Compute the amount to be reported as research and development expense by Sunland on its current year income statement. Assume equipment is purchased at the beginning of the year.

Answer 1

Sunland Company

The amount to be reported as research and development expense by Sunland on its current year income statement is:

= $412,600

Step-by-step explanation:

a) Data and Calculations:

Cost of equipment acquired that will have alternative

uses in future R&D projects over the next 5 years (uses straight-line depreciation) $283,500

Materials consumed in R&D projects 55,700

Consulting fees paid to outsiders for R&D projects 117,000

Personnel costs of persons involved in R&D projects 137,500

Indirect costs reasonably allocable to R&D projects 45,700

Materials purchased for future R&D projects 32,700

R&D Expenses for the year:

Depreciation of equipment ($283,500/5) $56,700

Materials consumed in R&D projects 55,700

Consulting fees paid to outsiders for R&D projects 117,000

Personnel costs of persons involved in R&D projects 137,500

Indirect costs reasonably allocable to R&D projects 45,700

Total R&D costs for the current year = $412,600