During 2005 Florence Nightingale Tool Company purchased a building site for its proposed research and development laboratory at a cost of 60,000. Construction of building was started in 2005. The building was completed on December 31, 2006, at a cost of $280,000 and was placed in service on January 2, 2007. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated salvage value.
Management estimates that about 50% of the projects of the research and development group will result in Long-term benefits (i.e. at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and conjunction with the research and development activities for 2007 appears below.
1. Completed projects with long-term benefits
2. Abandoned projects or projects that benefit the current period
3. Projects in process-results indeterminate

Number of projects Salaries employee Other Expenses(excluding
Benefits Building Deprec) Charges
1. 15 90,000 50,000
2. 10 65,000 15,000
3. 5 40,000 12,000
30 195,000 77,000

Upon recommendation of the research and development group Florence Nightingale Tool Company acquired a patent for manufacturing rights at a cost of $80,000. The patent was acquired on April 1, 2006 and has an economic life of 10 years.


Instructions:
If GAAP were followed, how would the items above relating to research and development activities be reported in the:
1.) The company’s Income statement for 2007
2.) The company’s balance sheet as of 12/31/07
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