Research and Development (ASC 730)

Question 1

What is included in R and D

Answer 1

1) Laboratory Research
2) Formulation & Design (and Modification for Formulation & Design) of possible products or process alternatives
3) Design, Construction and testing of preproduction prototypes and models
4) Design of tools, jigs, molds, and dies involving new technology
Design of a pilot plant

Question 2

What is NOT included in R and D

Answer 2

1) Engineering follow-through
2) Quality Control and Routine Testing
3) Troubleshooting
4) Routine design of tools, jigs, molds and dies
5) Legal work in connection with patent applications
6) Software Development Costs
7) Adaptation of an existing capability to a customer’s needs

Question 3

Accounting for R & D

Answer 3

Expense

Question 4

Labor, Materials and Overhead Costs

Answer 4

All part of R and D costs

Question 5

Fixed Assets used in Several R and D projects

Answer 5

Capitalize and Depreciate

DR: R and D expense
CR: Accumulated Depreciation

Question 6

Fixed Assets used Temporarily in R and D project

Answer 6

Depreciation related to the time frame is included in R and D costs

Question 7

Fixed Assets used in Single Research R and D project and asset has no alternative use

Answer 7

Expense immediately

Question 8

Internal Patent Costs

Answer 8

Developing Patent = R & D = Expense

Registration and Legal Costs = Capitalize

Question 9

External Patent Costs

Answer 9

Capitalize ALL Costs

Question 10

R & D services purchased from outside party

Answer 10

Included in R and D

Question 11

Firm Performs R and D for an outside party

Answer 11

Accumulated in an Inventory Account

Expensed as Cost of Goods Sold or Cost of services provided