Question

Janson Pharmaceuticals incurred the following costs in 2018 related to a new cancer drug: Research for...

Janson Pharmaceuticals incurred the following costs in 2018 related to a new cancer drug:

Research for new formulas $ 2,485,000
Development of a new formula 1,660,000
Legal and filing fees for a patent for the new formula 66,000
Total $ 4,211,000


The development costs were incurred after technological and commercial feasibility was established and after the future economic benefits were deemed probable. The project was successfully completed and the new drug was patented before the end of the 2018 fiscal year.

Required:
1. Calculate the amount of research and development expense Janson should report in its 2018 income statement related to this project.
2. Calculate the amount of research and development expense Janson should report in its 2018 income statement related to this project. Assuming that Janson prepares its financial statements according to International Financial Reporting Standards.

Business   Accounting   
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Answer #1

Answer:

1. We have,

According to US G.A.A.P, Janson report the following cases

Particulars Amount($)
Research for new formula 2,485,000
Development of a new formula 1,660,000
Total 4,145,000

Here Legal fees will be capitalized as intangible assests.

Therefore,Janson report the resarch and developmnet expense in its 2018 income statement is $4145000

2) We have,

According to (IFRS) International Financial Reporting Standards,

Research and development expense consider only the Research for new formula in given problem that is $2485000.

The remaining two costs are used for development of a new formula

Here also Legal fee will be used as intangible assests.

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