Dogwood Electronics has been working to develop a patented technology for backing up computer hard drives. Dogwood had the following activities related to this project.

March 1 Dogwood incurred €10,000 in legal and processing fees to file and record a patent for the technology.

April 5 Laboratory and materials fees to identify a working system, €23,000.

May 15 Prototype development and testing, €34,000.

June 1 Dogwood meets the economic viability threshold, upon receiving a firm contract for the product.

June 30 Final development of product based on earlier tests, €45,000.

Instructions

a. Prepare a schedule indicating Dogwood's R&D costs to be expensed and Dogwood's R&D costs to be capitalized.

b. Briefly discuss how the accounting for these costs will impact the information presented in Dogwood's income statement and statement of financial position. Discuss the effects in current and future periods.

c. Identify the criteria for determining "economic viability."