If a Research and Development Cost Has Alternative Future Uses

question 16

Multiple Choice

If a research and development cost has alternative future uses, then the company

• A) expenses the cost in the period incurred.
• B) follows normal accrual procedures.
• C) adds the cost to inventory.
• D) adds the cost to property, plant, and equipment.

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Definitions:

Allowances

Amounts deducted from gross revenue or expenses, accounting for items like returns, damaged goods, or discounts.

Operating Cycles

The period it takes for a company to purchase inventory, sell it, and convert the sale into cash.

Financial Statements

Reports that provide an overview of a company's financial condition, including balance sheet, income statement, and cash flow statement.

Cost of Merchandise Sold

The total cost incurred to acquire goods that have been sold during a period, including purchase price and other expenses related to procurement.