D is corrent. Research and development expenses include the salaries of laboratory employees researching how to build the new car (research), and the design, testing, and construction of a prototype (development). The Codification specifically excludes certain items from research and development, such as legal fees for the patent application and engineering follow-up during the early stages of commercial production. The cost of marketing research to promote the new car is a part of advertising expenses. Therefore, this answer is correct because the amount of research and development is $650,000 ($250,000 + $400,000).
A is incorrect because in addition to the research ($250,000) and development ($400,000) it includes legal fees ($20,000) and engineering costs ($50,000) ($250,000 + $400,000 + $20,000 + $50,000 = $720,000).
B is incorrect because it only includes research costs of $250,000 and excludes development costs of $400,000.
C is incorrect because it includes all given costs instead of research and development costs ($250,000 + $20,000 + $50,000 + $30,000 + $400,000 = $750,000).
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