NXS Semiconductor prepares its according to International Financial Reporting Standards.
The company incurred the following expenditures during 2021 related to the development of a chip to be used in mobile devices:
Salaries and wages for basic research ………………………..$ 3,450,000
Materials used in basic research ……………………………………..330,000
Other costs incurred for basic research ………………………..1,220,000
Development costs ……………………………………………………….1,800,000
Legal and filing fees for a patent for the new technology …..50,000
The development costs were incurred after NXS established technological and commercial feasibility and after NXS deemed the future economic benefits to be probable. The project was successfully completed, and the new chip was patented near the end of the 2021 fiscal year.
Required:
1. Which of the expenditures should NXS expense in its 2021 income statement?
2. Explain the accounting treatment of the remaining expenditures.
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