In 2015, Phoenix Corporation acquires a new research facility and hires several scientists to develop new products. No new products are developed until 2016, although the following expenditures were incurred:
Laboratory materials ………………………………………………………$40,000
Research salaries …………………………………………………………. 80,000
Overhead attributable to the research facility …………………………….. 30,000
R&E equipment placed into service (5-year MACRS recovery period)…..100,000
Total ……………………………………………………………………..$250,000
a. What are Phoenix Corporation’s deductions for R&E expenditures in 2015 and 2016 if the expensing method is elected?
b. How would your answer to Part a change if the deferral and amortization method were elected and the amortization period were 60 months?