Question;E12-16 (Accounting for R&D Costs) Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2009 the company expends $325,000 on a research project, but by the end of 2009 it is impossible to determine whether any benefit will be derived from it.Instructions(a) What account should be charged for the $325,000, and how should it be shown in the financial statements?(b) The project is completed in 2010, and a successful patent is obtained. The R&D costs to complete the project are $130,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2010 total $24,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2010.(c) In 2011, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2018. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2011.(d) Additional engineering and consulting costs incurred in 2011 required to advance the design of a product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably. Discuss the proper accounting treatment for this cost.
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