A Computer Company Has $2,500,000 in Research and Development Costs

question 90

Multiple Choice

A computer company has $2,500,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,000,000. What is the amount of net income or loss before taxes after these research and development costs are accounted for?

• A) $500,000 loss.
• B) $2,000,000 net income.
• C) $0.
• D) Cannot be determined from the information provided.

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Definitions:

Financial Statements

Consolidated documents such as the balance sheet, income statement, and cash flow statement that summarize a company’s financial performance.

Adjusting Entries

journal entries made in an accounting system to update accounts for transactions that have not yet been recorded by the end of a period.

Accounting Equation

The fundamental equation of accounting stating that Assets = Liabilities + Shareholder's Equity, underpinning the double-entry bookkeeping system.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary accounts' balances to permanent ones, thereby resetting the temporary accounts for the next period.