Listed below are several transactions that occurred during the year. All these amounts in each case were capitalized to an account called "R & D costs." At the end of the year, the company wants this account closed out and these amounts either expensed or capitalized to an asset account called "Development costs." (Click the icon to view the transactions.) Required Prepare the journal entry for each case. Where necessary or useful, explain your proposed treatment. Requirement a. During the year, $3,500,000 was paid to staff to investigate whether a drug combination was effective for reducing a specific type of cancer in mice. Evidence showed it materially reduced the effects of this cancer on the mice. Begin by selecting the correct proposed treatment. OA. At least one of the six capitalization criteria has been met-the intangible asset will generate probable future economic benefits. Thus, a portion (50%) of the amount spent on research should be capitalized in the current year. OB. Testing on animals, even if successful, does not prove that it is effective on humans. Thus, the drug fails the technical feasibility criterion and should be fully expensed. OC. At least one of the six capitalization criteria has been met-the intangible asset will generate probable future economic benefits. Thus, the full amount spent on research (100%) should be capitalized. Now prepare the journal entry for case (a). (Record debits first, then credits. Explanations are not required.) Case (a) Accounts Debit Credit Requirement b. During the year, $11,000,000 was paid to staff to investigate whether a drug combination was effective in reducing a specific type of cancer for terminally ill cancer patients. The trials were successful in a limited number of cases, but the results were mixed. Start by selecting the proposed treatment. A. The company has not established market and technical feasibility, therefore expense 100% of the current year cost. OB. The drug has proven to be successful in some cases, thus, capitalize 100% of the current year cost. OC. All six capitalization criteria have been met, therefore, we can capitalize at least a portion of the $11,000,000 spent in the current year. Now prepare the journal entry for case (b). (Record debits first, then credits. Explanations are not required.) Case (b) Accounts Debit Credit