1. Inventory

On December 31, 2016, SaulGroup's inventory of Product X is as follows: Historical cost is $1,000,000. Replacement cost is $700,000. Estimated selling price is $850,000. Estimated costs to sell are $100,000. Normal profit margin as a percentage of selling price is 20%. The entire inventory of Product X that was on hand at December 31, 2016 was completed in 2017 at a cost of $90,000 and sold at a price of $870,000.

a. What is the impact that Product X has on income in 2016 and 2017 under (1) IFRS and (2) U.S. GAAP?

b. How would you explain the difference in income, total assets, and total stockholders' equity using IFRS and U.S. GAAP over the years 2016 and 2017?

2. Plant, Property and Equipment

On January 2, 2016, SaulGroup purchased equipment at a cost of $5 million. The equipment has a five-year life, no residual value, and is depreciated on a straightline basis. On January 2, 2018, the fair value of the equipment (net of any accumulated depreciation) is determined as $6 million.

a. If the revaluation model is applied for measuremetsubsequent to initial recognition under IFRS, what is the impact the equipment has on SaulGroup's income in Years 2016 - 2020 using (1) IFRS and (2) U.S. GAAP?

b. How would you explain the difference in income, total assets, and total stockholders' equity using IFRS and U.S. GAAP over the period of Years 2016 to 2020?

3. Research and Development

In 2016, SaulGroup spent $1 million in developing Product Y. Of this amount, 30% related to development cost (IAS 38 criteria had been met for recognition of the development costs as an intangible asset). The development of Product Y was complete, and the product was available for sale on January 2, 2017. Sales of the product are expected to continue for five years. Straight-line method is used.

a. What is the impact the research and development costs have on SaulGroup's in 2016 and 2017 income under (1) IFRS and (2) U.S. GAAP?

b. How would you explain the difference in income, total assets, and total stockholders' equity related to Product Y using IFRS and U.S. GAAP over the year 2016 and 2017?

4. Intangible Assets

In 2014, SaulGroup acquired a brand with a fair value of $100,000. The brand is classified as an intangible asset with an indefinite life. At the end of 2016, the estimated selling price of the brand is $80,000 with zero selling cost. Expected future cash flows from continued used of the brand are $120,000, and the present value of the expected future cash flows is $70,000.4

a. Determine the amount of impairment loss, if any, to be recognized in the year 2016 under (1) IFRS and (2) U.S. GAAP.

b. How would you explain the difference in income, total assets, and total stockholders' equity using IFRS and U.S. GAAP over the year 2016 and 2017?