Reference no: EM133105010

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

1. Determine the impact research and development costs have on Lincoln Company's Year 1 net income under IFRS.

2. Determine the impact research and development costs have on Lincoln Company's Year 2 net income under IFRS.

3. Determine the impact research and development costs have on Lincoln Company's Year 1 net income under U.S. GAAP.

4. Determine the impact research and development costs have on Lincoln Company's Year 2 net income under U.S. GAAP.

5. Determine the total impact on stockholders' equity over the product's 5-year life (at December 31, Year 6) under IFRS.

6. Determine the total impact on stockholders' equity over the product's 5-year life (at December 31, Year 6) under U.S. GAAP.