Blue Corporation, a manufacturing company, decided to develop anew line of merchandise. The project began in 2008. Blue had thefollowing expenses in connection with the project:
2012 2013
Salaries $500,000 $600,000
Materials 90,000 70,000
Insurance 8,000 11,000
Utilities 6,000 8,000
Cost of inspection of material
For qualitycontrol 7,000 6,000
Promotionexpenses 11,000 18,000
Advertising 0 20,000
Equipmentdepreciation 15,000 14,000
Cost of marketsurvey 8,000 0
The new product will be introduced for sale beginning in July2010. Determine the amount of the deduction for research andexperimental expenditures for 2012, 2013 and 2014 if:
a. Blue Corporation elects to expense theresearch and experimental expenditures.
b. Blue Corporation elects to amortize theresearch and experimental expenditures over 60 months.