Tettleton Company incurred the following costs during the current year in con- nection with its research and development activities: Cost of equipment acquired that will have alternative uses in future research and development projects over the next 5 years (uses straight-line depreciation) : $300,000 Materials consumed in research and development projects $65,000 Consulting fees paid to outsiders for research and developement projects: $123,000 Personnel costs of persons involved in research and development projects: $315,000 Indirect costs reasonably allocable to research and development projects $44,000 Materials purchased for future research and development projects $72,000 Compute the amount to be reported as research and development expense by Tettleton on its income statement for the current year. Assume equipment is purchased at the beginning of the year.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Tettleton Company incurred the following costs during the current year in con- nection with its research and development activities:
Cost of equipment acquired that will have alternative uses in future research and development projects over the next 5 years (uses straight-line
Materials consumed in research and development projects $65,000
Consulting fees paid to outsiders for research and developement projects: $123,000
Personnel costs of persons involved in research and development projects: $315,000
Indirect costs reasonably allocable to research and development projects $44,000
Materials purchased for future research and development projects $72,000
Compute the amount to be reported as research and development expense by Tettleton on its income statement for the current year. Assume equipment is purchased at the beginning of the year.
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