The following information is taken from the March 31, 2018 annual report of Take-Two Interactive Software, Inc., a maker and distributor of video games. All amounts are in thousands of U.S. dollars.

Information from the Management Discussion, Balance Sheet and Note 8:

Software Development Costs and Licenses

Capitalized software development costs include direct costs incurred for internally developed titles and payments made to third-party software developers under development agreements. We capitalize internal software development costs (including stock-based compensation, specifically identifiable employee payroll expense and incentive compensation costs related to the completion and release of titles), third-party production and other content costs, subsequent to establishing technological feasibility of a software title. Technological feasibility of a product includes the completion of both technical design documentation and game design documentation. Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established. For products where proven technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product by product basis. Amortization of capitalized software development costs and licenses commences when a product is released and is recorded on a title-by-title basis in cost of goods sold. For capitalized software development costs, amortization is calculated using (1) the proportion of current year revenues to the total revenues expected to be recorded over the life of the title or (2) the straight-line method over the remaining estimated useful life of the title, whichever is greater. For capitalized licenses, amortization is calculated as a ratio of (1) current period revenues to the total revenues expected to be recorded over the remaining life of the title or (2) the contractual royalty rate based on actual net product sales as defined in the licensing agreement, whichever is greater. We evaluate the future recoverability of capitalized software development costs and licenses on a quarterly basis. Recoverability is primarily assessed based on the actual title's performance. For products that are scheduled to be released in the future, recoverability is evaluated based on the expected performance of the specific products to which the cost or license relates. We utilize a number of criteria in evaluating expected product performance, including: historical performance of comparable products developed with comparable technology; market performance of comparable titles; orders for the product prior to its release; general market conditions; and, past performance of the franchise. When we determine that the value of the title is unlikely to be recovered by product sales, capitalized costs are charged to cost of goods sold in the period in which such determination is made.

Assume an income tax rate of 25% where necessary.

REQUIRED:

You wish to compare the performance of Take-Two with one of its competitors, Electronic Arts, Inc. However, Electronic Arts does not capitalize any significant amounts of its software development costs. Estimate Take-Two's 2018 Income from operations if it did not capitalize any software development costs. Briefly explain your adjustment(s).

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Income Statement Information: 2018 Net sales.... Cost of goods sold.. Operating expenses. $1,792,892 898,311 759,004 .. Income (loss) from operalions .. $ 135,577 ...