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Question

Blue Corporation, a manufacturing company, decided to develop anew line of merchandise. The project began in 2015. Blue had thefollowing expenses in connection with the project:

2015 2016

Salaries $500,000 $600,000

Materials 90,000 70,000

Insurance 8,000 11,000

Utilities 6,000 8,000

Cost of inspection of material

For qualitycontrol 7,000 6,000

Promotionexpenses 11,000 18,000

Advertising -0- 20,000

Equipmentdepreciation 15,000 14,000

Cost of marketsurvey 8,000 -0-

The new product will be introduced for sale beginning in July 2017. Determine the amount of the deduction for research andexperimental expenditures for 2015, 2016 and 2017 if:

a. Blue Corporation elects to expense theresearch and experimental expenditures.

b. Blue Corporation elects to amortize theresearch and experimental expenditures over 60 months.