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Worked-example setupScope and assumptions
- The $480,000 laboratory activity is within Topic 730 and no exception applies.
- The $220,000 marketed-software cost is incurred before technological feasibility and the $160,000 cost is incurred after technological feasibility; all other Topic 985 facts are supplied as satisfied.
- The applicable accounting for the $90,000 patent-litigation cost has not yet been researched; the lawsuit outcome alone does not decide recognition.
- Period
- Current annual period
- Units
- USD
- Rounding
- Whole US dollars; no rounding required
Problem
Harbor Labs owns a recognized patent. During the year it incurs $480,000 of laboratory activity within Topic 730, $220,000 of marketed-software cost before technological feasibility, $160,000 after technological feasibility, and $90,000 of patent-litigation cost. Classify the supported amounts and identify what remains unresolved.
Route each cost
| Cost | Scope fact | Result |
|---|---|---|
| Laboratory activity | Within Topic 730 | $480,000 expense |
| Marketed software before feasibility | Before the supplied Topic 985 threshold | $220,000 expense |
| Marketed software after feasibility | After the supplied Topic 985 threshold | $160,000 capitalized |
| Patent litigation | Topic 730 exclusion is known; governing recognition rule is not | $90,000 unresolved |
Supported current expense is $700,000, and supported capitalization is $160,000. The $90,000 legal cost stays unresolved until the governing guidance and facts are documented. It is not forced into either total merely to close the workpaper.
Interpret the result
Capitalizing the supported software cost increases the current carrying amount by $160,000 before later amortization or impairment. The $700,000 expense reduces current pretax income under the supplied facts. Those effects follow the scope conclusions; they do not justify them.
Ownership of the patent does not combine these four activities. A reviewer can trace each cost to its purpose, date, model, and status without using the existing patent balance as a shortcut.
Verified calculation · scoped sums
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- amounts
- 4 fields
Inspect data
{
"post_feasibility_software": 160000,
"pre_feasibility_software": 220000,
"topic_730_research": 480000,
"unresolved_patent_litigation": 90000
}- totals
- 3 fields
Inspect data
{
"supported_capitalization": [
"post_feasibility_software"
],
"supported_expense": [
"topic_730_research",
"pre_feasibility_software"
],
"unresolved_cost": [
"unresolved_patent_litigation"
]
}Recomputed result
| Measure | Value |
|---|---|
| supported capitalization | 160,000 |
| supported expense | 700,000 |
| unresolved cost | 90,000 |