Ethics Case 10-12 on page 553 - Mayer Biotechnical, Inc - Research and development ? LO8

Mayer Biotechnical, Inc., develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. During 2011, 220 million was spent on R&D. Of this amount, 30 million was spent on the purchase of equipment to be used in a research project involving the development of a new antibiotic.

The controller, Alice Cooper, is considering capitalizing the equipment and depreciating it over the five-year useful life of the equipment at 6 million per year, even though the equipment likely will be used on only one project. The company president has asked Alice to make every effort to increase 2011...