LO.5 Blue Corporation, a manufacturing company, decided to develop a new line of merchandise. The project began in 2010. Blue had the following expenses in connection with the project.

2010 2011 Salaries $400,000 $500,000 Materials 80,000 90,000 Insurance 10,000 15,000 Utilities 7,000 9,000 Cost of inspection of materials for quality control 5,000 6,000 Promotion expenses 10,000 12,000 Advertising –0– 30,000 Equipment depreciation 10,000 12,000 Cost of market survey 8,000 –0–

The new product will be introduced for sale beginning in July 2012. Determine the amount of the deduction for research and experimental expenditures for 2010, 2011, and 2012 if:

a. Blue Corporation elects to expense the research and experimental expenditures.

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