P11.6 (LO 2, 4) (Accounting for R&D Costs) During 2023, Wright Tool Company purchased a building site for its proposed research and development laboratory at a cost of $60,000. Construction of thebuilding was started in 2023. The building was completed on December 31, 2024, at a cost of $320,000 and was placed in service on January 2, 2025. The estimated useful life of the building for depreciationpurposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated residual value.Management estimates that about 50% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit thecurrent period or are abandoned before completion. A summary of the number of projects and the direct costs incurred in conjunction with the research and development activities for 2025 appears below.Completed projects with long-term benefitsAbandoned projects or projects that benefit the current periodProjects in process results indeterminateTotalNumber ofProjects1510530Salaries andEmployee Benefits$ 90,00065,00040,000$195,000Other Expenses(excluding BuildingDepreciation Charges)$50,00015,00012,000$77,000Upon recommendation of the research and development group, Wright Tool Company acquired a patent for manufacturing rights at a cost of $88,000. The patent was acquired on April 1, 2024, and has aneconomic life of 10 years.InstructionsIf generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements?a. The company's income statement for 2025.b. The company's balance sheet as of December 31, 2025.

a.The items related to research and development activities should be reported on as below in the…

Instructions If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements? a. The company's income statement for 2025. b. The company's balance sheet as of December 31, 2025.

Instructions If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements? a. The company's income statement for 2025. b. The company's balance sheet as of December 31, 2025.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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