Research and Development Health Resources is involved in a large number of research projects in the health care industry. It has just completed a major breakthrough in developing a cure for male-pattern baldness. The cost of developing the initial product, laboratory testing, and testing on a representative group of adult males was $1,500,000.

a. How must Health Resources report the research and development costs associated with its new product?

b. As Health Resources completed development of its new product, it learned that a major competitor, Top Sciences had developed a product that keeps hair from turning gray.

Top Sciences offered to sell its patent to Health Resources for $2 million. If Health Resources were to purchase the patent from Top Sciences, how would it record the purchase?

c. Evaluate the inconsistencies, if any, in the accounting treatment for the two products.