Alexandria Company started a research and development project on a new product on January 1, 2021. Total cost incurred before reaching technological feasibility amounted to P4,000,000 while development cost after reaching technological feasibility amounted to P5,000,000 before year-end. Prior to commercial production, the entity paid legal and registration fees amounting to P1,000,000 in filing for a patent on the new product on July 01, 2021. Early in January 2022, an additional amount of P2,000,000 was incurred to develop the project to full manufacturing stage. The patent was approved in early January 2022 and valid for 20 years. However, the entity expected technological advancements will render the new product virtually obsolete by December 31, 2026. The entity decided to account separately any capitalized development cost. 1.What amount should be capitalized as cost of patent? a. 1,000,000 b. 6,000,000 c. 7,000,000 d. 5,000,000 2.What amount should be capitalized as development cost? a. 5,000,000 b. 7,000,000 c. 9,000,000 d. 6,000,000 3.What total amount should be reported as amortization of intangibleassets for 2022? a. 1,600,000 b. 1,000,000 c. 200,000 d. 400,000
Alexandria Company started a research and development project on a new product on January 1, 2021.
Total cost incurred before reaching technological feasibility amounted to P4,000,000 while development cost after reaching technological feasibility amounted to P5,000,000 before year-end.
Prior to commercial production, the entity paid legal and registration fees amounting to P1,000,000 in filing for a patent on the new product on July 01, 2021.
Early in January 2022, an additional amount of P2,000,000 was incurred to develop the project to full manufacturing stage.
The patent was approved in early January 2022 and valid for 20 years.
However, the entity expected technological advancements will render the new product virtually obsolete by December 31, 2026.
The entity decided to account separately any capitalized development cost.
1.What amount should be capitalized as cost of patent?
a. 1,000,000 b. 6,000,000 c. 7,000,000 d. 5,000,000
2.What amount should be capitalized as development cost?
a. 5,000,000 b. 7,000,000 c. 9,000,000 d. 6,000,000
3.What total amount should be reported as amortization of intangibleassets for 2022?
a. 1,600,000 b. 1,000,000 c. 200,000 d. 400,000
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