Question

-In accounting for research and experimental expenditures incurred in 2018, all of the following alternatives are available with the exception of

A) expense R&E costs in the year paid or incurred.

B) expense R&E costs in the year in which a product or process becomes marketable.

C) defer and amortize R&E costs as a ratable deduction over a period of 60 months or more.

D) capitalize and write off R&E costs only when the research project is abandoned or is worthless.

-Kimiko Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $120,000. No hardware was acquired. How much of the cost can Kimiko deduct this year?

A) $20,000

B) $40,000

C) $60,000

D) $90,000

-In calculating depletion of natural resources each period,

A) cost depletion must be used.

B) percentage depletion must be used.

C) the smaller of cost depletion or percentage depletion must be used.

D) the greater of cost depletion or percentage depletion must be used.

Answer 1

1.

option B

we can expense R&E costs in the year paid or incurred, defer and amortize R&E costs as a ratable deduction over a period of 60 months or more and capitalize and write off R&E costs only when the research project is abandoned or is worthless

but expense R&E costs in the year in which a product or process becomes marketable is not correct

so answer is option B

2.

option B $40,000

120000*12/36

since Kimiko Corporation purchased a software that is not acquired in connection with hardware and thus it is not is covered under sec 197. so sec 197 is not available because it is not off-the-shelf software

3.

option A

cost depletion must be used

Percentage Depletion method involves a high level of planning and those estimates are used to calculate depletion therefore it is not much reliable.

In Cost of depletion method, cost of depletion is calculated by taking into account number of unit available and no. of units sold.