Given Below Are Costs Incurred During Year 1 and Year $\$ 800,000$

question 43

Essay

Given below are costs incurred during Year 1 and Year 2 by a company that follows the policy of decreasing the intangible asset account directly as amortized.
Research was conducted to discover a new product and costs of $400,000 in Year 1 and $800,000 in Year 2 were incurred.After several months,a product was created and a patent secured for a cost of $180,000,effective as of July 1,Year 2.The company expects to have increased revenues of $500,000 over the next several years.The patent is expected to be useful for the next 10 years.
A) Prepare a partial income statement for the year ended December 31, Year 2.
B) How should the $\$ 800,000$ cost incurred in Year 2 be reported on the financial statements?

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Definitions:

Revenues

The total income generated by a business or government from its activities, before any expenses are subtracted.

Economic Report

A document or publication that provides information and analysis about the economic conditions or trends.

Federal Budget

The government's estimate of revenue and spending for a fiscal year.

Urban Welfare Payments

Financial support provided by government programs to individuals and families in urban areas, aimed at helping them meet basic needs.