CLASS QUESTIONS 12BMWF - (3 At the beginning of the current...

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CLASS QUESTIONS (12B) (1) Inventor Company spent $100,000 to research and develop a new product. Under GAAP, would the amount spent be capitalized or expensed? What are a couple of reasons that support this treatment? Materials, Equipment, and facilities/ personnel/ contract services get expensed. If a company owns a research facility that conducts R&D activities and that has altenrative futures uses, it should capitalize the facility as an operational asset. The company accounts for (2) Discover Company purchased two buildings to be used for R&D purposes. Both buildings are physically usable for 20 years. Building A will be used in a series of separate research projects which should span most of its physical life. Building B will only be used in a single research project which is expected to take about five years. How do you think that Discover Company should account for each of these buildings? Since it falls under materials, equipment, and facilities, we would expense the buildings.
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Unformatted text preview: (3) At the beginning of the current year, Cartwright Corporation paid $15,000 for materials to be used exclusively in a single R&D project. Of these, 20% are still on hand at year-end. How should Cartwright account for the materials purchased? Expense the materials used in the project. For the remaining inventory, carry them as inventory and allocate as consumed, or capitalize and depreciate as used. (4) Cartwright Corporation also purchased an experimental machine from an inventor for $12,000. The machine will be used for a single R&D project for two years after which it will have no residual value. How should Cartwright account for the cost of the machine? Expense (5) Refer to Illustrations 12-16 and 12-17 on p. 611 pertaining to Merck and Co., Inc. How much did Merck expense for R&D in 2006? 4782.9 What is Merck's compounded annual growth rate in R&D expenditures for the period -1996-2006? 11%...
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This note was uploaded on 09/02/2011 for the course MGT 3305 taught by Professor Reed during the Spring '08 term at Baylor.

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CLASS QUESTIONS 12BMWF - (3 At the beginning of the current...

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