Question: Blue Corporation, a manufacturing company, decided to develop a new line of merchandise. The project began in 2015. Blue had the following expenses in connection with the project:
2015 2016
Salaries 500,000 600,000
Materials 90,000 70,000
Insurance 8,000 11,000
Utilities 6,000 8,000
Cost of inspection of materials for quality control 7,000 6,000
Promotion expenses 11,000 18,000
Advertising 0 20,000
Equipment depreciation 15,000 14,000
Cost of market survey 8,000 0
The new product will be introduced for sale beginning in July 2017. Determine the amount of the deduction for research and experimental expenditures for 2015, 2016, and 2017 if:
a. Blue Corporation elects to expense the research and experimental expenditures.
b. Blue Corporation elects to amortize the research and experimental expenditures over 60 months.