Question

During the current year, Orr Company incurred the following costs: Research and development services performed by Key Corp. for Orr $ 150,000 Design, construction, and testing of preproduction prototypes and models 200,000 Testing in search for new products or process alternatives 175,000 In its income statement for the current year, what amount should Orr report as research and development expense

Answer 1

Answer:

$525,000

Explanation:

The amount to be recognized as research and development expense for the year includes  the cost of research and development services performed by Key Corp. for Orr, the cost incurred on testing of pre-production prototypes and models as well as the cost of testing in search for new products or process alternatives,

In other words, all costs incurred would be expensed since no of them met the capitalization criteria as per  generally acceptable accounting principles