• Amazon.com, Inc. invested $1.5 billion in research and development (R&D) for new cloud computing technologies. Of this amount, $500 million was capitalized and the rest expensed. The company reported the following financial data:
  • Total Revenue: $300 billion
  • Cost of Goods Sold: $200 billion
  • Operating Expenses (excluding R&D): $50 billion
  • Net Income: $20 billion

• Requirements:
  1. Compute Amazon's total expenditure on R&D for the year.
  2. Prepare an income statement showing the impact of expensed and capitalized R&D expenses on net income.
  3. Analyze the strategic benefits of capitalizing R&D expenses versus expensing them immediately.
  4. Evaluate how capitalizing R&D expenses affects Amazon's operating margin and net profit margin.
  5. Discuss the disclosure requirements for R&D expenses in Amazon's financial statements.