Please respond to the following questions in each scenario:

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 complete and 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 measurement subsequent 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?