Electronics R Us Spent $25,000 on Research and Development to Create

question 53

Multiple Choice

Electronics R Us spent $25,000 on research and development to create a new product. The product was successfully developed and launched into the market. How should the research and development costs be treated?

• A) The full $25,000 should be capitalized.
• B) The research portion of the $25,000 should be capitalized.
• C) The research portion of the $25,000 should be expensed.
• D) The full $25,000 should be expensed.

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Definitions:

Profitability Index

A capital budgeting tool that measures the ratio of the present value of future cash flows from an investment to the investment's initial cost.

Mutually Exclusive

Situations or events that cannot both occur at the same time.

Net Present Value

A financial metric that calculates the present value of all cash flows, both incoming and outgoing, of an investment.

Managers

People in charge of managing or overseeing any or all parts of a corporation or comparable entity.