Acc301 Essentials of Accounting: E1-5 The following information was taken from the 2006

Acc301 Essentials of Accounting

E1-5 (Requirements A and B)
The following information was taken from the 2006 financial statements of pharmaceutical giant Merck and Co. All dollar amounts are in millions.
Retained earnings, January 1, 2006 37,980.00
Materials and production expense 6,001.10
Marketing and administrative expense 8,165.40
Dividends 3,318.70 Sales revenue 22,636.00
Research and development expense 4,782.90
Tax expense 1,787.60 Other revenue 2,677.10

Instructions:
a. After analyzing the data, complete the following Income Statement and Retained Earnings Statement for the year ending December 31, 2006. (List revenues and expenses from largest to smallest amount, e.g. 10, 5, 2. Round answers to 1 decimal place, e.g. 2,550.0.)
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?
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