A Computer Company Has $3,000,000 in Research and Development Costs

question 198

Multiple Choice

A computer company has $3,000,000 in research and development costs. Before accounting for these costs, the net income of the company is $3,600,000. What is the amount of net income or loss before taxes after these research and development costs are accounted for?

• A) $600,000 loss.
• B) $3,000,000 net income.
• C) $600,000 net income.
• D) Cannot be determined from the information provided.

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Definitions:

Par Value

The face value of a bond or stock, representing the amount the issuer agrees to pay at maturity (for bonds) or the nominal value of a share.

Carrying Value

Also known as the book value, it is the value of an asset as reported on the balance sheet, calculated as the original cost minus accumulated depreciation, depletion, or amortization.

Journal Entry

A record of the financial transactions and their effect on specific accounts in the accounting system.

Retirement

The period in life when an individual stops working on a full-time basis, often accompanied by income from savings, investments, or pension.