Morgan Pharmaceutical spends $50,000 this year in research and development for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements?
A) Increase Assets.
B) Decrease Revenues.
C) Increase Expenses.
D) Increase Revenues.
Answer: C
Suppose a company spends $100,000 in the current year to research and develop a safety device for motorcycles. By the end of the year, the company estimates that the new safety device has an 80% chance of generating $300,000 in revenues from sales to customers over the next five years. For what amount would Research and Development Expense be reported in the current year?
A) $100,000.
B) $80,000.
C) $20,000.
D) $0.
Answer: A
Suppose a company spends $100,000 on research and development in 2021. As a result of the products developed, additional revenue is generated over the next five years totaling $600,000. When is the cost of the research and development in 2021 recognized as an expense?
A) Evenly over the period 2022-2026.
B) Full amount in 2026.
C) Evenly over the period 2021-2025.
D) Full amount in 2021.
Answer: D
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