Bio-Lab Pharmaceuticals was engaged in a project to develop a new drug that would dramatically shorten the recovery period of influenza

Bio-Lab Pharmaceuticals was engaged in a project to develop a new drug that would dramatically shorten the recovery period of influenza. The project cost the company $150,000 before Bio-Lab abandoned the project due to the slim possibility to gain FDA approval. Bio-Lab then spent $300,000 on another project to develop a shot that would achieve the same goal, and the company is confident in gaining FDA approval and in generating profits from the shot. What amount would be expensed for these projects?

A) $0.

B) $150,000.

C) $300,000.

D) $450,000.

Answer: D

Research and development costs should be capitalized when the:

A) Future benefit is probable and the amount can be reasonably estimated.

B) Future benefit is reasonably possible and the amount can be reasonably estimated.

C) Future benefit is probable and the amount cannot be reasonably estimated.

D) None of these answer choices are correct.

Answer: D

Aspen, Inc. developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with its own research, Aspen decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments?

A) Assets $600,000 Expenses $0.

B) Assets $250,000 Expenses $350,000.

C) Assets $350,000 Expenses $250,000.

D) Assets $0 Expenses $600,000.

Answer: C