The Theoretical Justification for Expensing Research and Development (R&D) Cost

question 24

Multiple Choice

The theoretical justification for expensing research and development (R&D) cost as it is incurred is based on which of the following arguments?

• A) R&D costs provide no future benefits, thus it does not meet the definition of an asset
• B) R&D costs are incurred to generate current period revenue; thus the matching concept requires that it be expensed as incurred.
• C) Whether R&D costs that have been incurred will provide future benefit is uncertain, thus it does not meet the definition of an asset.
• D) Since R&D costs have been incurred during the current period, they meet the definition of an expense.

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Definitions:

Coralline

Referring to a type of algae that secretes calcium carbonate, contributing to the building of coral reefs.

Coral Reefs

Underwater ecosystems characterized by reef-building corals, which are colonies of tiny living animals found in marine waters containing few nutrients.

Pseudopodia

Temporary, amoeba-like projections of the cell surface which assist in the movement and feeding of some eukaryotic cells.

cAMP

Cyclic AMP, a crucial secondary messenger in various biological functions.