Research and Development Costs (PAS 38)
Required: Based on the result of your audit, determine the following for the year ended December 31,2011:
____________1. Total Research Costs
____________2. Total Development Costs
____________3. Total Research and Development Costs
____________4. Expenses which are not Research and Development Costs
Extracted text: Problem 1. GE Inc. developed a time machine which will be commercialized in 2012. As a new audit staff of SGV & Co., you are assigned to audit the research and development costs of GE in 2011. The following expenditures in 2011 were recorded by GE Inc. in the research and development account: Periodic design changes to existing products Quality control during commercial production including routine testing Design of tools, jigs, molds and dies involving the new time machine Testing in search for time machine Conceptual formulation and design of time machine Routine design of tools, jigs, molds and dies of time machine Engineering follow through in an early phase of commercial production Trouble shooting breakdown during production Laboratory research aimed at obtaining or discovering new product Design, construction and testing of preproduction prototype and model Searching for application of research finding and other knowledge Design, construction and testing of the improved product Routine on-going effort to refine or improve the quality of an existing product 100,000 Organization and pre-incorporation costs incurred Costs incurred for promoting and marketing the time machine Design, construction and operation of a pilot plant Cost of Building constructed on 1/1/2011 for future R&D projects Depreciation on the building above used for development of pilot plant P1,000,000 200,000 100,000 300,000 400,000 500,000 600,000 300,000 200,000 300,000 300,000 200,000 500,000 300,000 200,000 4,000,000 800,000 Required: Based on the result of your audit, determine the following for the year ended December 31,2011: 1. Total Research Costs _2. Total Development Costs 3. Total Research and Development Costs 4. Expenses which are not Research and Development Costs