The Holly Company incurred research and development costs in Year 1 as follows:
Equipment acquired for use in various R& D projects ………………………… $400,000 Depreciation on the above equipment …………………………………………. 60,000 Materials used………………………………………………………………….. 100,000 Compensation costs of personnel………………………………………………. 200,000
Fees to outside consulting firms ………………………………………………. 70,000
Indirect costs appropriately allocated……………………………………………. 100,000
The total research and development expense in Holly’s Year 1 income statement under U. S. GAP should be:
a. $ 930,000
b. $ 870,000
c. $ 530,000
d. $ 470,000