Question
. The Baltimore Corporation reported net income in Year One of $90,000 and in Year Two of $140,000. The company spent $16,000 for research and
. The Baltimore Corporation reported net income in Year One of $90,000 and in Year Two of $140,000. The company spent $16,000 for research and development in Year One and another $24,000 for research and development in Year Two. The company follows the policy of capitalizing its research and development costs and then amortizing them over four years (using the half-year convention for the initial year). The straight-line method is used for amortization with no expected residual value. a. If U.S. GAAP is to be applied, what was the correctly reported net income for Year One? b. If U.S. GAAP is to be applied, what was the correctly reported net income for Year Two?
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