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bearhunter [10]
3 years ago
7

In Year 1, in a project to develop Product X, Lincoln Company incurred research and development costs totaling $10 million. Linc

oln is able to clearly distinguish the research phase from the development phase of the project. Research-phase costs are $6 million, and development-phase costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product X was brought to market in Year 2 and is expected to be marketable for 5 years. Total sales of Product X are estimated at more than $100 million.
Required:
a. Determine the impact research and development costs have on Lincoln Company's Year 1 and Year 2 income under (1) IFRS and (2) U.S. GAAP.
b. Summarize the difference in income, total assets, and total stockholders' equity related to Product X over its five-year life under the two different sets of accounting rules.
Business
1 answer:
snow_lady [41]3 years ago
5 0

Answer:

Answer is explained in the explanation section below.

Explanation:

Data Given:

Research and Development Cost = $10 million

Research Phase Cost = $6 million

Development Cost = $4 million

Total Sales of Product X are estimated at more than = $100 million

Solution:

a.

1. IFRS:

Research cost of $6 million have been expensed in year 1 in case of IFRS.

Whereas, for year 2 developmental cost is reported as assets and amortization is recorded on the asset which is the 5th part of the developmental cost of $4 million.

$4,000,000/5 = $800,000

2. U.S. GAAP:

Under U.S. GAAP in year 1, total of $10 million have been expensed including both research and development cost.

Under U.S. GAAP in year 2, however, there is no asset reported and all the costs are expensed in year 1 hence, no impact on the income statement.

b.

Income: In year 1 under IFRS, income will be higher by $4 million ($10-$6)million before the implication of tax.

But for year 2 to year 5:

In case of IFRS, income will be lowered due to the amortization on the deferred development cost. It will decrease by $800,000.

The total assets and stock holder's equity under IFRS will be higher by the following amounts each of the years.

Year 1  $4,000,000

Year 2 $3,200,000

Year 3 $2,400,000

Year 4 $1,600,000

Year 5 $800,000

The above amount is decreased by $800,000 each year because of the amortization of asset.

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AlexFokin [52]

Answer:

Closing value of inventory = $357 for 21 units

Explanation:

As for the provided information we have,

Under FIFO method we know,

FIFO means First In First Out, under this the goods bought at earliest are sold earliest.

That means first opening inventory is sold, then the inventory purchased at the earliest.

Now we have,

Opening Inventory = 27 units @ $17 = $459

Purchases:

Aug 5              22 units @ $16 = $352

Aug 12             26 units @ $17 = $442

Provided 54 units are sold on Aug 15, that means, opening inventory of 27 units, 22 units bought on Aug 5, and 54 - 27 - 22 = 5 units from purchases on Aug 12.

Therefore, after sale units left = 26 - 5 = 21 units

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4 0
2 years ago
Which of the following should take place in the completing stage when writing an instant message?a. Creating a content outline b
antoniya [11.8K]

Answer:

C. Proofreading

Explanation:

Option A is wrong. In an instant message, no one is trying to create a content outline as it is not a letter or assignment.

Option B is incorrect. An instant message can be sent to many people at a time. Therefore, maximizing the number of receivers is the main idea while writing an instant message.

Option D is also not correct. Acronyms are hard to understand. Writing acronyms in an instant message will be challenging for the receivers.

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5 0
3 years ago
Prior to adjustment at August 31, Salaries Expense has a debit balance of $272,650. Salaries owed but not paid as of the same da
zlopas [31]

Answer:

A. Dr Salary Expense $3,140

Cr Salary expense outstanding $3,140

B. Dr Income summary $275,790

Cr Salary expense $275,790

Explanation:

A. Preparation of the adjusting entry to record accrued salaries as of August 31

August 31

Dr Salary Expense $3,140

Cr Salary expense outstanding $3,140

(To record accrued salaries)

B. Preparation of the Closing entry on August 31

August 31

Dr Income summary $275,790

Cr Salary expense $275,790

($272,650+$3,140)

(To record Closing entry)

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2 years ago
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3 years ago
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