Question

A computer company has $2,800,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,000,000. What is the amount of net income or loss after these R & D costs are accounted for?

$800,000 loss
$2,000,000 net income
$0
Cannot be determined from the information provided.

Answer 1

$800,000 loss

Step-by-step explanation:

The Research and development cost is recorded as an expense in the income statement. Before considering the income statement the net income of the company is $2,000,000 it means the research and development expense has not been charged yet. After charging the expense against the income for the period will be:

Net income = Net income beofre R&D cost - R&D cost = $2,000,000 - $2,800,000 = -$800,000

Hence, there is a loss of $800,000 if we consider the R&D cost.