Consider the following scenarios:

Scenario 1:	In the current year, a toy manufacturer spends $900,000 on R&D costs to develop a new toy. By the end of the year, the design for the new toy has been patented. Legal and filing fees associated with the patent are $50,000. The patent has a fair value $1,500,000 and an estimated useful life of 10 years.
Scenario 2:	In the current year, a toy manufacturer purchases a patent for the exclusive right to produce a toy from a third party for $1,500,000. The patent has an estimated useful life of 10 years.

Under which scenario would the company report greater research and development expense in the current year?

Multiple Choice

• Scenario 1

• Scenario 2

• The expense would be the same under each scenario

• An expense is not recorded under either scenario