Reference no: EM13587625

Blue Corporation, a manufacturing company, decided to develop anew line of merchandise. The project began in 2008. Blue had thefollowing expenses in connection with the project:

                                                                 2008                2009

Salaries                                                    $300,000         $400,000

Materials                                                   80,000             70,000

Insurance                                                 10,000              15,000

Utilities                                                      7,000                8,000

Cost of inspection of material

For qualitycontrol                                      4,000                 4,000

Promotionexpenses                                  10,000              7,000    

Advertising                                                  -0-                30,000

Equipmentdepreciation                              10,000            12,000

Cost of marketsurvey                                   8,000                 -0-

The new product will be introduced for sale beginning in July2010. Determine the amount of the deduction for research andexperimental expenditures for 2008, 2009 and 2010 if:

a.    Blue Corporation elects to expense theresearch and experimental expenditures.

b.     Blue Corporation elects to amortize theresearch and experimental expenditures over 60 months.