• Tesla, Inc. is expanding its production capacity globally. During the year, they capitalized $500 million in research and development (R&D) expenses related to new battery technologies. The company reported the following financial information:
  • Net Income before R&D: $1.2 billion
  • Operating Income before R&D: $2.5 billion
  • Total Assets: $50 billion
  • Total Liabilities: $30 billion

• Requirements:
  1. Calculate Tesla's net income after capitalizing R&D expenses.
  2. Prepare an income statement showing the impact of capitalized R&D expenses on operating income.
  3. Analyze Tesla's decision to capitalize R&D costs versus expensing them immediately.
  4. Evaluate how capitalizing R&D expenses affects Tesla's return on assets (ROA).
  5. Discuss the disclosure requirements for capitalized R&D expenses in Tesla's financial statements.