Consider the following information from a company's records for 2020:

Materials used in research and development projects	$4,500
Equipment acquired that will have alternative future uses in future
R&D projects for five years	1,500
Personnel costs of employees involved in R&D projects	5,500
Consulting fees paid to outsiders for R&D projects	2,800
Indirect costs reasonably allocable to R&D projects	250
Legal fees associated with registration of a patent resulting from a 2020 R&D project	2,500

Required: Compute the amount of R&D costs that should be classified as expenses in determining 2020 net income.

The following costs were incurred by Mark Corporation during 2020:

• Legal fees paid to attorneys in connection with a patent application related to a new invention developed by the company's laboratory personnel: $40,000.
• Salaries of personnel involved in searching for applications of new research findings: $150,000.
• Cost of machinery acquired on January 1, 2020: $355,000. The machinery will be used in a current research and development project, as well as several other R&D projects over the next eight years, after which the machine is expected to be sold for $15,000. Mark Corporation uses straight-line depreciation.
• Costs of design, construction, and testing of preproduction prototypes of potential new product lines for the company: $70,000.
• Cost of developing a valuable new product that was successfully patented: $100,000.
• Cost of marketing research to promote the new product: $60,000.

Required: Calculate the total research and development expense that should appear in Mark's 2020 income statement.

Certain activities are listed below. Indicate which of the activities would be considered in determining R&D costs.

a.	Testing a new type of machine to evaluate its potential usefulness in production
b.	Engineering follow-through in an early phase of commercial production
c.	Total cost of an R&D building-No alternative use
d.	Salary of director of R&D
e.	Current period depreciation on a building housing R&D activities (alternative future use)
f.	General and administrative costs reasonably allocated to R&D projects
g.	Patent acquired solely for use in a specific R&D project

Costs associated with various intangibles of a company may either be expensed when incurred or capitalized and amortized. Indicate how each of the following costs should be recorded.

1.	Initial fee to acquire a franchise
2.	Design, construction, and testing of preproduction prototypes and models
3.	Legal costs incurred in connection with a successful patent application
4.	Laboratory research aimed at discovery of new knowledge
5.	Cost of purchased equipment that will be used in a series of R&D projects over a ten-year period
6.	Legal costs of the initial incorporation of a business
7.	Cost of a long-term lease of land containing mineral deposits
8.	Annual service fee paid to the franchiser's headquarters for administrative services rendered to the franchisee

New Co. received a patent on a new type of machine. The legal costs and the patent application costs totaled $180,000. R&D costs incurred to create the machine were $120,000. In the year in which the company received the patent, $25,000 was spent in the successful defense of a patent infringement suit.

Required: What amount of patent costs, if any, should be capitalized as an intangible asset?

Listed below is a series of statements about various costs associated with intangibles. Indicate whether each of these costs should be expensed or capitalized.

a.	Software production costs incurred prior to technological feasibility being established
b.	Continuing franchise costs
c.	The cost paid over the fair value of an acquired company's net assets
d.	Maintenance and customer support costs incurred after a software package is released for sale
e.	Legal costs incurred on the successful defense of a patent infringement suit
f.	The cost of acquiring a copyright
g.	Software production costs incurred after technological feasibility is established
h.	Costs of improving the software used in a company's management information system
i.	Legal fees incurred in conjunction with the unsuccessful defense of a patent infringement lawsuit
j.	Employee training costs associated with training employees to run new software