Question

1-B&B Cancer Center of Dallas incurred the following costs during the year:

Research and development costs	$222,000
Patent	122,500
Trademark	27,500
Marketing costs	40,000
Purchase of MRI	162,750

How much of these costs should be capitalized?

1. $574,750
2. $264,750
3. $312,750
4. $150,000

2. Which of the following is correct regarding the process of benchmarking?

1. It occurs when a company increases the price of its products and reduces operating expenses.
2. It enhances financial analysis by comparing a company’s financial ratios with those of competing companies in the same industry.
3. It creates substantial sales growth for most companies.
4. It is also called trend analysis.

3. Presented below are selected ratios derived from B&B's financial statements:

Return on sales	1.7%
Total asset turnover	4.25
Financial leverage	2.75
Treasury stock return Dividend retention rate	3.25   1.95

Using the ROE model framework, how much is B&B's ROE?

1. 12.95%
2. 19.87%
3. 29.18%
4. 39.59%

4The following information was provided by B&B Inc. for its year ending December 31:

            

Total Assets	$20,000,000
Net income for the year	12,500,000
Shareholders' equity at year-end	10,500,000

How much does B&B, Inc. owe its creditors as of December 31,?

1. $22,500,000
2. $20,000,000
3. $9,500,000
4. $17,000,000

Answer 1

Since, multiple questions have been posted, I have answered the first one.

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Question 1:

Answer is $312,750. (which is Option C)

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Explanation:

The amount to be capitalized is calculated as below:

Amount to be Capitalized = Patent + Trademark + Purchase of MRI = 122,500 + 27,500 + 162,750 = $312,750

Research and development costs and marketing costs are not capitalized. These costs will be expensed as they are incurred. As such the total value of capitalized costs will include the costs of patent, trademark and purchase of MRI.