During 2010, a high-tech company spent $1,000,000 on research and development; however, no new products have been completed as of the end of the year. This amount will be shown in the company's financial statements as a(an)
A) immediate expense under the expense recognition rules.
B) long-term intangible asset until a patentable item is produced.
C) inventory in the current asset category of the balance sheet.
D) long-term investment.
E) part of cost of goods sold on the income statement.

Question

Quizplus · Accepted Answer

Research and development costs are expensed as incurred according to the expense recognition principle, rather than capitalized as assets. This means they are recognized immediately as expenses in the period they are incurred if they do not directly lead to a patentable item or a tangible asset.

During 2010, a High-Tech Company Spent $1,000,000 on Research and Development;