a. Complete the cash flow statement (shaded boxes) assuming that
i. The new product development costs are capitalized and amortized; assume that if the product development costs are capitalized, it isn’t necessary to depreciate any of the costs in 2018.
ii. The new product development costs are expensed as incurred
b. Compare the two cash flow statements. How do they influence your evaluation of Barkway?
c. How are the balance sheet and income statement affected by the different accounting treatments for the new product development costs?
d. If Barkway’s management received bonuses based on net income, which treatment for the product development costs do you think they would prefer?