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:
2008 2009
Salaries $300,000 $400,000
Materials 80,000 70,000
Insurance 10,000 15,000
Utilities 7,000 8,000
Cost of inspection of material
For qualitycontrol 4,000 4,000
Promotionexpenses 10,000 7,000
Advertising -0- 30,000
Equipmentdepreciation 10,000 12,000
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 2008, 2009 and 2010 if:
a. Blue Corporation elects to expense theresearch and experimental expenditures.
b. Blue Corporation elects to amortize theresearch and experimental expenditures over 60 months.