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Homework answers / question archive / During 2018, Cullumber Company purchased a building site for its proposed research and development laboratory at a cost of $41,000

During 2018, Cullumber Company purchased a building site for its proposed research and development laboratory at a cost of $41,000

Accounting

During 2018, Cullumber Company purchased a building site for its proposed research and development laboratory at a cost of $41,000. Construction of the building was started in 2018. The building was completed on December 31, 2019, at a cost of $440,000 and was placed in service on January 2, 2020. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated residual value.

 

Management estimates that about 50% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and the direct costs incurred in conjunction with the research and development activities for 2020 appears below.

 

Number

of Projects Salaries and Employee

Benefits Other Expenses

(excluding Building

Depreciation Charges)

Completed projects with long-term benefits

15

$82,000

$41,000

Abandoned projects or projects that

  benefit the current period

10

58,000

16,000

Projects in process—results indeterminate

5

35,000

13,000

Total

30

$175,000

$70,000

 

Upon recommendation of the research and development group, Cullumber Company acquired a patent for manufacturing rights at a cost of $76,000. The patent was acquired on April 1, 2019, and has an economic life of 10 years.

 

If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements?

 

 

 

Collapse question part

(a)

   

The company's income statement for 2020.

 

Cullumber Company

Income Statement (Partial)

 

Research and Development Expenses

$267,000

 

Amortization of Patent

7,600

 

Collapse question part

(b)

The company's balance sheet as of December 31, 2020.

 

Cullumber Company

Balance Sheet (Partial)

choose the accounting period

 

select a balance sheet item

 

$enter a dollar amount

select a balance sheet item

 

enter a dollar amount

select a balance sheet item

 

enter a dollar amount

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