Research and development (R&D) costs:

Multiple Choice

• None of these answer choices are correct.

• Must be capitalized and amortized.

• May be expensed or capitalized, at the option of the reporting entity.

• Generally pertain to activities that occur prior to the start of production.

A company entered into a two-year cloud computing arrangement by paying $90,000 immediately to a vendor and also incurring the following costs:

Pre-implementation planning	$	50,000
Integration of software		85,000
Coding and customization of software		120,000
Post-implementation operation		65,000

Determine the amount the company should capitalize at the beginning of the arrangement.

Multiple Choice

• $90,000.

• $305,000.

• $330,000.

• $295,000.

In accounting for oil and gas exploration costs, companies:

Multiple Choice

• May use the successful efforts method.

• May not use the full-cost method.

• May use the slippery slope method.

• All of these answer choices are correct.

A company purchased new equipment for $71,000. The company paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $1,550; sales tax paid $5,200; and installation cost, $3,600. The cost recorded for the equipment was:

Multiple Choice

• $81,350.

• $72,550.

• $71,000.

• $77,750.

If a company incurs legal obligations associated with the retirement of a tangible long-lived asset as a result of acquiring the asset:

Multiple Choice

• The company records the difference between the fair value of the asset and the obligation when the asset is acquired.

• None of these answer choices are correct.

• The company recognizes the obligation at fair value when the asset is retired.

• The company recognizes the obligation at fair value when the asset is acquired.