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

Business

Jose Sandoval

21 July, 18:50

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?

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Ernest Ortega · Answer 1

The impact of spending $50,000 on the research and development for a new drug to to cure liver damage will increase the expenses of the Morgan Pharmaceutical in the years financial statements.

Explanation:

Morgan pharmaceutical is pending $50,000 on he research and development of new drug which can cure the liver damage, from this spending company is expecting that after they have successfully created new drug it will lead to the increase in sales, which will ultimately lead to increase in profits, which then would totally recover the initial cost incurred on research and development but until then these expenses would be shown in the current years financial statement as expenses, and thus would increase the total expenses of the company.