Abbott I aboratories reports the following (summary) income statement.

a. Compute the percent of net sales that Abbott Laboratories spends on research and development (R&D). Compare this level of expenditure with the percentages for other companies that are discussed in the Business Insight box on page 5-4. How would you assess the appropriateness of its R&D expense level?

b. Describe how accounting for R&D expenditures affects Abbott Laboratories' balance sheet and income statement.

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Year Ended December 31 ($ millions) Net sales... Cost of products sold..... Research and development..... Selling, general and administrative Pretax operating earnings. 2007 $25,914 (11,422) (2,506) (7.408) $ 4,578