Question

Daily Kneads, Inc. spent $400,000 researching and developing new production processes. The entry to record the $400,000 expenditures will cause

Answer 1

The entry to record the $400,000 expenditures for research and development will cause an increase in assets and a corresponding decrease in cash or accounts payable.

Step-by-step explanation:

The entry to record the $400,000 expenditures for research and development by Daily Kneads, Inc. will cause an increase in the company's assets and a corresponding decrease in its cash or accounts payable, depending on whether the expenses are paid immediately or on credit.

One possible entry would be: Debit Research and Development Expense $400,000 and Credit Cash or Accounts Payable $400,000.

Another possible entry could be: Debit Prepaid Research and Development $400,000 and Credit Cash or Accounts Payable $400,000, if the expenses are paid in advance.