Doobie Brothers Co. capitalizes research and development costs because they are optimistic about the the product they are developing. What effect will this have on the financial statements?

Select one:

a. Financial Statements will be correct because this is the correct accounting treatment when a company is optimistic about research and development costs.

b. Assets - Overstated; Liabilities - Correct; Equity - Overstated

c. Assets - Overstated; Liabilities - Correct; Equity - Understated

d. Assets - Understated; Liabilities - Correct; Equity - Understated

e. Assets - Understated; Liabilities - Overstated; Equity - Understated

f. The correct answer is not in this set of solutions.