CHAPTER 22: INTANGIBLE ASSET (PROBLEM 3)

6. Requirement: How much is the total research and development expense in 20x1?

Solution:
Design, construction and testing of
preproduction prototypes and models 240,000
Research and development services
performed by Billit Corporation for Eagle ` 180,000
Testing in search for new products or
process alternatives 210,000
Total R&D expense 630,000

7. Requirements:
a. What amount is recognized as R&D expense?
b. What amount is capitalized as intangible asset?
c. What amount is capitalized as inventory?

Solution:
Requirement (a):
Costs to complete a detailed design of the software 1,560,000
Coding and testing costs to establish technological feasibility 1,200,000
R&D expense 2,760,000

Requirement (b):
Coding and testing costs to after technological feasibility has
been established 5,280,000
Costs of producing the product master 1,800,000
Intangible asset 7,080,000
Requirement (c):
Reproduction costs of software from the product master 3,000,000
Packaging costs for the products 1,080,000
Inventory 4,080,000