Determine the amount of the deduction for research

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Problem - Blue Corporation, a manufacturing company, decided to develop a new line of merchandise. The project began in 2019. Blue had the following expenses in connection with the project:

 

2019

2020

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 2021. Determine the amount of the deduction for research and experimental expenditures for 2019, 2020, and 2021 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.

Reference no: EM132667499

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