A pharmaceutical company, Pfizer Inc., has the following data for the year ended December 31, 2023:

• Research and development costs: $2,500,000
• Estimated future benefits: $1,800,000
• Sales: $8,000,000
• Cost of Goods Sold: $4,500,000
• Operating Expenses: $2,000,000
• Determine how much of the research and development costs should be expensed.
• Calculate the impact on net income if all R&D costs are expensed.
• How would the financial statements be affected if R&D costs were capitalized?
• Discuss the rationale for expensing R&D costs under the Conservatism Principle.
• How should the company record the R&D expenses?