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:

Foreign Supplier

A business or individual located outside a company's home country that provides goods or services.

Legislative Decree

A law enacted by the executive branch under the authority delegated to it by the legislative branch, typically found in parliamentary systems.

Ethical Philosophies

Branch of philosophy dealing with values relating to human conduct, focusing on the rightness and wrongness of actions, the goodness and badness of motives and ends.

Substantial Benefits

Significant advantages or gains, often referring to those received from contractual agreements or employment terms.