Question - Blue, Inc., a biotechnology company, developed and patented a diagnostic product called Help. Blue purchased some research equipment to be used exclusively for Help and subsequent research projects. Blue defeated a legal challenge to its Help patent, and began production and marketing operations for the project. Corporate headquarters' costs were allocated to Blue's research division as a percentage of the division's salaries. Required: In your own words!!!!

1. How should the equipment purchased for Help be reported in Blue's income statements and statements of financial position?

2. How should corporate headquarters' costs allocated to the research division be classified in Blue's income statements? Why?

3. How should the legal expenses incurred in defending Help's patent be reported in Blue's financial statements?