Delaware Company incurred the following research and development costs during 2021: Salaries and wages for lab research $ 400,000 Materials used in R&D projects 200,000 Purchase of equipment 900,000 Fees paid to third parties for R&D projects 320,000 Patent filing and legal costs for a developed product 65,000 Salaries, wages, and supplies for R&D work performed for another company under a contract 350,000 Total $ 2,235,000 The equipment has a seven-year life and will be used for a number of research projects. Depreciation for 2021 is $120,000. Required: Calculate the amount of research and development expense that Delaware should report in its 2021 income statement.

Question

Business

Dania

12 February, 13:14

Delaware Company incurred the following research and development costs during 2021: Salaries and wages for lab research $ 400,000 Materials used in R&D projects 200,000 Purchase of equipment 900,000 Fees paid to third parties for R&D projects 320,000 Patent filing and legal costs for a developed product 65,000 Salaries, wages, and supplies for R&D work performed for another company under a contract 350,000 Total $ 2,235,000 The equipment has a seven-year life and will be used for a number of research projects. Depreciation for 2021 is $120,000. Required: Calculate the amount of research and development expense that Delaware should report in its 2021 income statement.

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Teagan Padilla · Answer 1

Total R&D Expense = 1040000 USD to be reported in 2021 income statement.

Explanation:

First of all, let me arrange this data in a quite presentable way to facilitate you.

1. Salaries and wages for lab research = 400,000 USD

2. Materials Used in R&D projects = 200,000 USD

3. Purchase of equipment = 900,000 USD

4. Fees paid to third parties for R&D projects = 320,000 USD

5. Patent filing and legal costs for a developed product = 65,000 USD

6. Salaries, wages, and supplies for R&D work performed for another company under a contract = 350,000 USD

Total Cost = 2,235,000 USD

Note: Depreciation for 2021 is 120,000 USD.

Now, we have to list out different costs included in Research and Development Expenses to be included in the income statement.

For R&D expenses, we need to look for costs that are directly related to R&D and add up those costs to calculate the R&D Expense that Delaware should report in its 2021 income statement.

Following cost components will be added together for the Research and Development Expenses:

1. Depreciation For 2021 = 120,000 USD

2. Materials Used in R&D projects = 200,000 USD

3. Fees paid to third parties for R&D projects = 320,000 USD

4. Salaries and wages for lab research = 400,000 USD

Total R&D Expense = 120,000 + 200,000 + 320,000 USD + 400,000 USD

Total R&D Expense = 1040000 USD to be reported in 2021 income statement.