South-western Federal Taxation 2018: Individual Income Taxes
41st Edition
ISBN: 9781337385886
Author: William H. Hoffman, James C. Young, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
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Chapter 7, Problem 15DQ
To determine
Explain under the circumstances in which a company would elect to amortize research and experimental expenditures rather than using the expense method.
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How should research and development costs be accounted for, according to an IASB Statement?
a. Must be capitalized when incurred and then amortized over their estimated useful lives.
b. Must be expensed in the period incurred.
c. May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved.
d. Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.
Which of the following costs would be capitalized?
a.
Cost of research to determine whether a market for the product exists.
b.
Salaries of research staff.
c.
Engineering costs incurred to advance the product to the full production stage.
d.
Acquisition cost of equipment to be used on current research project only.
ts) Which principle has FASB used to determine the accounting method for recording research and
development costs? (7)
ہے
O Systematic allocation over the life of the asset
O Minimization of income tax payments
O Associating the cause of the expense with its recognition
O Immediate recognition of costs with no certain future benefit
Chapter 7 Solutions
South-western Federal Taxation 2018: Individual Income Taxes
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Many years ago, Jack purchased 400shares of Canary...Ch. 7 - Scan is in the business of buying and selling...Ch. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQ
Ch. 7 - Prob. 11DQCh. 7 - Prob. 12DQCh. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - Prob. 17DQCh. 7 - Prob. 18DQCh. 7 - Prob. 19DQCh. 7 - Prob. 20DQCh. 7 - Last year Aleshia identified 15,000 as a...Ch. 7 - Prob. 22CECh. 7 - Prob. 23CECh. 7 - Prob. 24CECh. 7 - Prob. 25CECh. 7 - Prob. 26CECh. 7 - Prob. 27CECh. 7 - Prob. 28CECh. 7 - Prob. 29CECh. 7 - Prob. 30CECh. 7 - Prob. 31CECh. 7 - Prob. 32PCh. 7 - Monty loaned his friend Ned 20,000 three years...Ch. 7 - Sally is in the business of purchasing accounts...Ch. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Prob. 47PCh. 7 - Prob. 48PCh. 7 - Prob. 49PCh. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Prob. 53CPCh. 7 - Prob. 54CPCh. 7 - Prob. 1RPCh. 7 - Prob. 2RP
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- One of the main differences between U.S. GAAP and IAS/IFRS is the measurement of property, plant & equipment subsequent to initial recognition. Read IAS 16 and answer the following questions. Provide a list of the references you have used to search this topic. 1) What are the accounting models accepted under IFRS for the measurement of property, plant & equipment subsequent to initial recognition? 2) How often should the company revalue its property, plant & equipment under the revaluation model? 3) How should the revaluation gains and losses be accounted for and reported in the financial statements? 4) How should any claim for compensation from third parties for impairment be accounted for? 5) How should the recoverability of the carrying amount of property, plant & equipment be accounted for?arrow_forwardIf a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as O depreciation expensed as part of research and development costs. O depreciation or immediate write-off depending on company policy. O research and development expense in the period(s) of construction. O an expense at such time as productive research and development has been obtained from the facility.arrow_forwardGenerally, are net operating losses available for personal-use expenditures? Explain.arrow_forward
- Why FASB treat the spending on the search and development as expense why it can’t be treated as long term asset.arrow_forwardIf a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as a. research and development expense in the period(s) of construction. b. depreciation deducted as part of research and development costs. c. depreciation or immediate write-off depending on company policy. d. an expense at such time as productive research and development has been obtained from the facility.arrow_forwardWhich statement is correct regarding the treatment of research costs in accordance with IAS 38 intangible assets? Select one alternative: Research costs may be deferred if costs can be measured reliably. Research costs may not be deferred unless it is almost certain that the project they are applied to will bring future economic benefits and costs can be measured reliably. Research costs may not be recorded as an intangible asset and thus the cost is expensed in the period it is incurred. Research costs can be deferred (recorded as an asset) when it is probable that the project they are applied to will bring future economic benefits.arrow_forward
- Under IFRS a. research and development expenditures are expensed in the period incurred. b. research and development expenditures are capitalized and amortized. c. development expenditures that meet certain criteria are capitalized and amortized; research expenditures are expensed in the period incurred. d. research expenditures that meet certain criteria are capitalized and amortized; development expenditures are expensed in the period incurred.arrow_forwardPlease explain why other are incorrectarrow_forward5. Which of the following is an element of cost? a. Cost of employee benefits not directly associated with the acquisition of PPE b. Initial estimate of the cost of dismantling and removing the item and restoring the site on which it is located, the obligation of which an entity incurs. c. Advertising and promotion d. initial operating losses e. Refundable purchase taxesarrow_forward
- How should research and development expenditure be dealt with in an entity's financial statements? a- Research expenditure should always be written off as an expense but development expenditure should always be capitalised as an intangible asset b- Research and development expenditure should always be written off as an expense c- Research expenditure should always be written off as an expense but development expenditure should be capitalized as an intangible asset if it satisfies certain conditions d- Research and development expenditure should always be capitalised as an intangible assetarrow_forward17. Capital expenditures are not immediately expensed because these items: A)do not extend the life of an asset. B)return an asset to its prior condition. C)increase the asset's capacity. D)do all of the above. 19. Which of the following should be included in the cost of equipment? A) Freight costs to deliver the equipment B)Installation costs for the equipment C)Testing costs to get the equipment ready for use D)All of the abovearrow_forwardWhich of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets? Select one: a. Assets not currently undergoing the activities necessary to prepare them for their intended use. b. Assets under construction for a company's own use. c. Assets intended for sale or lease that are produced as discrete projects. d. Assets financed through the issuance of long-term debt.arrow_forward
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