Question

During the current year, Lyle Co. incurred $204,000 of research and development costs in its laboratory to develop a patent that was granted on July 1. Legal fees and other costs associated with registration of the patent totaled $41,000. The estimated useful life of the patent is 10 years. What amount should Lyle capitalize for the patent on July 1?

Answer 1

Answer:

It will capitalize 245,000 to recognize the patent intangible asset

Explanation:

It will capitalize the entire research adn development cost as well as the fees and registration cost as are part of the incurred cost needed to obtain the patent

Therefore: 204,000 + 41,000 = 245,000

Answer 2

Answer:

$41,000

Explanation:

According to US GAAP standards and even IFRS rules, research and development costs must be recorded as expenses and cannot be capitalized. This means that the $204,000 spent on research must be recorded as expenses during the current year. Only the legal fess and other registration costs can be capitalized since they were incurred after the R&D process was over.