rhetorical strategies

  

Kilgore Pharmaceuticals paid cash for the following amounts to fund its research​ activities: testing materials and​ supplies, $611,600​; research​ consultants, $111,200​; planning and design​ consultants, $135,300​; and​ general-purpose laboratory​ equipment, $957,000. The equipment has a 10​-year useful life and no residual value. Prepare the journal entry required to record Kilgore’s research expenditures for the year. The equipment was acquired on 

January 1.

Research and development​ (R&D) is one of the most important investments for industries such as pharmaceuticals and information technology. A company undertakes​ R&D activities to create new products or processes to generate future revenues.​ R&D activity includes laboratory research designed to discover new​ knowledge, testing to determine process​ alternatives, modification of product or process​ design, and conceptual formulation and design of product or process alternatives. There is a distinction between​ research-phase and​ development-phase costs:

  

t•

​Research-phase   activities include an original and planned investigation undertaken with the   prospect of gaining new scientific or technical knowledge and understanding.

 

​Development-phase   expenditures relate to the application of research findings or other   knowledge to a plan or design for the production of new or substantially   improved​   materials, devices,​   products, processes,​   systems, or services before the start of commercial production or use.

​R&D activity excludes quality​ control, troubleshooting, and routine and ongoing initiatives designed to refine existing products or processes and the adaptation of existing capabilities. 

Firms must expense almost all​ R&D costs as incurred. In limited​ cases, firms can capitalize some​ R&D costs.​ R&D costs that are reimbursed under contract​ (i.e., sold to another firm or through​ customer-funded R&D) would be capitalized as a receivable or accumulated in an inventory account if reimbursed. Firms can also capitalize​ R&D equipment and buildings with alternative future uses. In​ addition, firms can capitalize the cost of​ R&D in a patent account if the research was purchased from an outside research firm.​ Finally, certain internally generated software development costs can be capitalized after the company establishes technological feasibility and the software is​ sold, leased, or marketed to third parties​ (external users).

To record the​ R&D expense for the​ year, we include all the research activities expenses except for the equipment cost. Recall that firms can capitalize​ R&D equipment and buildings with alternative future uses. We know that the equipment purchased is​ general-purpose laboratory equipment. The company can use the​ general-purpose laboratory equipment in the laboratory for an extended period of time for several alternative experiments. As a​ result, Kilgore should capitalize and depreciate the equipment over its useful life . 

Needs help with similar assignment?

We are available 24x7 to deliver the best services and assignment ready within 3-4 hours? Order a custom-written, plagiarism-free paper

Order Over WhatsApp Place an Order Online

Do you have an upcoming essay or assignment due?

All of our assignments are originally produced, unique, and free of plagiarism.

If yes Order Similar Paper

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *