Question
Perez Biotechnical, Inc. develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement
Perez Biotechnical, Inc. develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. During 2016, $220 million was spent on R&D. Of this amount, $30 million was spent on the purchase of equipment to be used in a research project involving the development of a new antibiotic.
The controller, Tyler Cooper, is considering capitalizing the equipment and depreciating it over the five-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 Tyler to make every effort to increase 2016 earnings because in 2017 the company will be seeking significant new financing from both debt and equity sources. I guess we might use the equipment in other projects later. Tyler wondered to himself.
Create a new thread and discuss the ethical dilemma Tyler faces in determining the treatment of the $30 million equipment purchase.
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