Question

Wildhorse Co. incurred research and development costs in 2018 as follows:

Materials used in research and development projects $995000
Equipment acquired that will have alternate future uses
in future research and development projects 3450000
Depreciation for 2018 on above equipment 545000
Personnel costs of persons involved in research and
development projects 795000
Consulting fees paid to outsiders for research and
development projects 345000
Indirect costs reasonably allocable to research
and development projects 270000
The amount of research and development costs charged to Wildhorse's 2018 income statement should be:______.
a. $2335000.
b. $5585000.
c. $2135000.
d. $2950000.

Answer 1

d. $2,950,000

Step-by-step explanation:

The computation of amount of research and development costs charged is shown below:-

Amount of research and development costs = Direct materials + Personnel cost + Consulting fee paid to outsiders + Indirect costs + Depreciation

= $995,000 + $795,000 + $345,000 + $270,000 + $545,000

= $2,950,000

Therefore for computing the amount of research and development costs we simply applied the above formula.