XYZ Company had sales of $1,000,000, raw material and labor costs of $100,000 (assume the entire amount is included in Cost of Goods Sold) and R&D payroll costs of $200,000 and no other expenses besides taxes. The tax rate is 21 percent.

In addition to the facts above, XYZ purchased an expensive super-computer on 1/1/19 for $300,000. The computer has a 5-year life with no residual value.

a. Going back to the straight-line assumption, assume that the computer was used in manufacturing operations (tip: think about the expense category). Prepare a multi-step income statement. Assume that taxes are based on pre-tax income on the tax return.

b. Now assume that it was an off-the-shelf computer used for research and development activities (tip: see multiple choice, chapter 10, question 33). Prepare a multi-step income statement. Assume that taxes are based on pre-tax income on the tax return.

c. Now assume that the computer was used in R&D activities but it was a customized computer that has no alternative uses. Prepare a multi-step income statement. Assume that taxes are based on pre-tax income on the tax return.