Zach developed a new machine for manufacturing cookies and had it patented. The following were incurred: Special equipment for developing the new machine 1,440,000 Salaries and benefits of scientists 160,000 Cost of testing prototype 200,000 Legal fees for filing of patent 120,000 Fees paid to Intellectual Property Office 40,000 Other patent application requirements by the IPO 32,000 What amount is considered as research and development expense?

Zach developed a new machine for manufacturing cookies and had it patented. The following were incurred: Special equipment for developing the new machine 1,440,000 Salaries and benefits of scientists 160,000 Cost of testing prototype 200,000 Legal fees for filing of patent 120,000 Fees paid to Intellectual Property Office 40,000 Other patent application requirements by the IPO 32,000 What amount is considered as research and development expense?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required information [The following information applies to the questions displayed below.] Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device Testing and modification of the prototype Legal fees for patent application Legal fees for successful defense of the new patent Total $4,100,000 1,200,000 610,000 410,000 81,000 41,000 $6,442,000 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all the above as costs of the patent. Management contends that the device represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Patont costs capitalized Required: 1. Determine the amount Satellite Systems should capitalize to the Patent account in the balance sheet.
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