During Year 1, Reforce Company conducted research and development on a new product. By March 31, Year 2, the company had determined the new product was technologically feasible, and the company obtained a patent for the product in April, Year 2. The company developed an initial prototype by June 30, Year 2. Also, by June 30, Year 2, the company had developed a business plan including identification of a ready market for the product, and a commitment of resources to ready the product for market. After completion of the second prototype at the end of September, Year 2, the product was ready for commercial production and marketing. The company has tracked costs associated with the new product as follows:
Market research costs, Year 1 …………………………………………. $ 25,000
Research costs, Year 1 ………………………………………………… 100,000
Research costs, 1st quarter, Year 2 ……………………………………. 70,000
Legal fees to register patent, April, Year 2 …………………………… 25,000
Development costs for initial prototype, 2nd quarter, Year 2 ………… 500,000
Testing of initial prototype, June, Year 2 ……………………………... 50,000
Management time to develop business plan, 2nd quarter, Year 2 …….. 15,000
Cost of revisions and second prototype, 3rd quarter, Year 2 …………. 175,000
Legal fees to defend patent, October, Year 2 ………………………… 50,000
Commercial production costs, 4th quarter, Year 2 ……………………. 400,000
Marketing campaign, 4th quarter, Year 2 …………………………….. 80,000
Required:
Determine the amount related to this new product that will be reported as intangible assets on the company's December 31, Year 2, balance sheet. 31. Philosopher Stone Inc. incurred costs of $20,000 to develop an intranet Web site for internal use. The intranet will be used to store information related to company policies, customers, and products. Access to the intranet is password-protected and is restricted to company personnel. As the company's