On December 31 Y1, the Company ARL develop a Product: Master 3D. The disbursement associate to the Product are the following: Research $6,000,000 and Development $4,000,000. The criteria have been met for recognition of the development costs as an asset. Product Master D will be in the market in Year 2 and is expected to marketable for 5 years. Total sales of the product are estimated at $100,000,000.

Instructions: Using IAS 38, determine the effect of the Research & Development costs have on Companys Net Income. Answer the following questions.

1. Choose ONLY ONE and explain (5 points)

Net Income using IFRS will be in Year 1:

a. Higher by $________ larger than U.S. GAAP income.

b. Lower by $________ larger than U.S. GAAP income.

c. Both will be the same.

2. Explanation: (5 points)

3. Year 3 (ending balance) (5 points)

Determine the Book Value of the asset

4. Explanation: (5 points)

Show you computations.