Gratwick Company is in the process of developing a revolutionary new product. A new

division of the company was formed to develop, manufacture, and market this new

product. As of year-end (December 31, 2019), the new product has not been

manufactured for resale; however, a prototype unit was built and is in operation.

Throughout 2020 the new division incurred certain costs. These costs include design and

engineering studies, prototype manufacturing costs, administrative expenses (including

salaries of administrative personnel), and market research costs. In addition, the company

purchased approximately Tk. 50,00000 in equipment (estimated useful life, 10 years) for

use in developing and manufacturing the new product. The company built approximately

Tk. 20,00000 of this equipment specifically for the design and development of the new

product; it used the remaining Tk. 30,00000 of equipment to manufacture the

preproduction and will use it to manufacture the new product once it is in

commercial production.

Question: 1. What is the definition of research and of development Cost?

2. Briefly indicate the practical and conceptual ideas on accounting

practices for research and development costs?

3. How should Gratwick record the various costs in the financial

statements for the year ended December 31, 2019?