(AICPA adapted) Ethics Mayer Biotechnical, Inc., develops, manufactures, and sells pharmaceuticals. Signicant research and develop- Case 10-12 ment (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. Research and During 2021, $220 million was spent on R&D. Of this amount, $30 million was spent on the purchase of equip- development ment to be used in a research project involving the development of a new antibiotic. . LO108 The controller, Alice Cooper, is considering capitalizing the equipment and depreciating it over the ve-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 2021 earnings because in 2022 the company will be seeking signicant new nancing from both debt and equity sources. \"I guess we might use the equipment in other projects later,\" Alice wondered to herself. CHAPTER 10 Property, Plant. and Equipment and Intangible Assets: Acquisition 567 Required: 1. Assuming that the equipment was purchased at the beginning of 2021, by how much would Alice's treatment of the equipment increase before tax earnings as opposed to expensing the equipment cost? 2. Discuss the ethical dilemma Alice faces in determining the treatment of the $30 million equipment purchase