Lincoln Company has an accounting policy for internal reporting purposes whereby the costs of any research and development projects that are over 80 percent likely to succeed are capitalized and then depreciated over a five-year period with a full year of depreciation in the year of capitalization. In the current year, $300,000 was spent on Project One, and it was 45 percent likely to succeed, $700,000 was spent on Project Two, and it was 65 percent likely to succeed, and $1,000,000 was spent on Project Three, and it was 85 percent likely to succeed. In converting the internal financial statements to external financial statements, by how much will net income for the current year have to be reduced? O $150,000 O $200,000 O $3480,000 O $1,000,000
Lincoln Company has an accounting policy for internal reporting purposes whereby the costs of any research and development projects that are over 80 percent likely to succeed are capitalized and then depreciated over a five-year period with a full year of depreciation in the year of capitalization. In the current year, $300,000 was spent on Project One, and it was 45 percent likely to succeed, $700,000 was spent on Project Two, and it was 65 percent likely to succeed, and $1,000,000 was spent on Project Three, and it was 85 percent likely to succeed. In converting the internal financial statements to external financial statements, by how much will net income for the current year have to be reduced? O $150,000 O $200,000 O $3480,000 O $1,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lincoln Company has an accounting policy for internal reporting purposes whereby the costs
of any research and development projects that are over 80 percent likely to succeed are
capitalized and then depreciated over a five-year period with a full year of depreciation in the
year of capitalization. In the current year, $300,000 was spent on Project One, and it was
45 percent likely to succeed, $700,000 was spent on Project Two, and it was 65 percent
likely to succeed, and $1,000,000 was spent on Project Three, and it was 85 percent likely to
succeed. In converting the internal financial statements to external financial statements, by
how much will net income for the current year have to be reduced?
O $150,000
O $200,000
O $3480,000
O $1,000,000
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