Liddy Corp. began constructing a new warehouse for its operations during the current year. In the year Liddy incurred interest of $30,000 on a working capital loan, and interest on a construction loan for the warehouse of $60,000. Interest computed on the average accumulated expenditures for the warehouse construction was $50,000. What amount of interest should Liddy expense for the year?
Research and development costs for projects other than software development should be:
Detailed Answer
Correct answer: (A)
Expensed in the period incurred.
3
Research and development (R&D) costs:
Detailed Answer
Correct answer: (A)
Generally pertain to activities that occur prior to the start of production.
4
Research and development expense for a given period includes:
Detailed Answer
Correct answer: (B)
Depreciation on a research and development facility.
5
Amortization of capitalized computer software costs is:
Detailed Answer
Correct answer: (B)
The greater of the percentage-of-revenue method or the straight-line method.
6
Axcel Software began a new development project in 2010. The project reached technological feasibility on June 30, 2011 and was available for release to customers at the beginning of 2012. Development costs incurred prior to June 30, 2011 were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. 2012 revenues from the sale of the new software were $4,000,000 and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2012 amortization of the software development costs would be:
Under International Financial Reporting Standards, research expenditures are:
Detailed Answer
Correct answer: (A)
Expensed in the period incurred.
8
Under International Financial Reporting Standards, development expenditures are:
Detailed Answer
Correct answer: (C)
Capitalized if certain criteria are met.
9
Cromartie LTD. prepares its financial statements according to International Financial Reporting Standards. During 2011 the company incurred $1,245,000 in research expenditures to develop a new product. An additional $756,000 in development expenditures were incurred after technological and commercial feasibility was established and after the future economic benefits were deemed probable. The project was successfully completed and the new product was patented before the end of the 2011 fiscal year. Sale of the product began in 2012. What amount of the above expenditures would Cromartie expense in its 2011 income statement?
Detailed Answer
Correct answer: (C)
$1,245,000.
[Under IFRS, only the $1,245,000 in research expenditures is expensed. The development costs are capitalized as an intangible asset.]
10
In accounting for oil and gas exploration costs, companies:
Detailed Answer
Correct answer: (B)
May use the successful efforts method.
