Morgan Pharmaceutical spends $50,000 this year in research and development for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements?

Question

Quizplus · Accepted Answer

The $50,000 spending on research and development is an expense and will therefore increase the expenses on the income statement. It will not impact assets or revenues until the drug is approved and sales are generated in the future.

Morgan Pharmaceutical Spends $50,000 This Year in Research and Development