Which of the Following Is the Proper Accounting Treatment for Research

question 15

Multiple Choice

Which of the following is the proper accounting treatment for research and development costs?

• A)Research and development costs must be capitalised and amortised over 20 years or less.
• B)Research and development costs must be capitalised and amortised over 70 years or less.
• C)Research and development costs must be capitalised and expensed each year to the extent that their value has declined.
• D)Research costs must be expensed and development costs may be capitalised in limited circumstances.

---

Definitions:

Externality

A consequence of an economic activity experienced by unrelated third parties; can be either positive or negative.

Neighbors

Individuals or entities located near one another, often used in the context of residential, geographic, or international proximity.

Market Failure

An instance where the free market's distribution of goods and services is inefficient, usually causing a reduction in net social welfare.

Allocate Resources

The process of distributing available resources, such as time, money, and assets, among various projects or business units to maximize efficiency and achieve strategic goals.