Johnson & Johnson Data for the year ended December 31, 2023:

Item	Amount
Research and Development Costs	$5,000,000
Estimated Future Benefits	$3,500,000
Sales	$20,000,000
Cost of Goods Sold	$12,000,000
Operating Expenses	$5,000,000

• Determine how much of the R&D costs should be expensed.
• Calculate the impact on net income if all R&D costs are expensed.
• Discuss the effect of expensing R&D costs on Johnson & Johnson’s profitability.
• Explain why the Conservatism Principle is important in expensing R&D costs.