Suppose the following information was taken from the 2017 financial statements of pharmaceutical giant Merck and Co.

Question:

Suppose the following information was taken from the 2017 financial statements of pharmaceutical giant Merck and Co. (All dollar amounts are in millions.)
Retained earnings, January 1, 2017 ................ $43,698.8
Cost of goods sold ...................................... 9,018.9
Selling and administrative expenses ................... 8,543.2
Dividends ................................................. 3,597.7
Sales revenue ........................................... 38,576.0
Research and development expense ................... 5,845.0
Income tax expense ...................................... 2,267.6
Instructions
(a) After analyzing the data, prepare an income statement and a retained earnings statement for the year ending December 31, 2017.
(b) Suppose that Merck decided to reduce its research and development expense by 50%. What would be the short-term implications? What would be the long-term implications? How do you think the stock market would react?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Financial Accounting Tools for Business Decision Making

ISBN: 978-1118953907

8th edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

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