Question: Katy Co. incurred research and development costs totaling $200million in Year 2016 in a project to develop Product XYZ. Assume that the...

Question:

Katy Co. incurred research and development costs totaling $200million in Year 2016 in a project to develop Product XYZ. Assume that the Katy Co. is able to clearly distinguish the research phasefrom development phase of the project. Research-phase costs are $80 million,and development-phase costs are $120 million. All of the IAS 38 criteria havebeen met for recognition of the development costs as an asset. Product XYZ isbrought to the market in 2017 and is expected to be marketable for five year.Total sales of Product XYZ are estimated at more than $1 billion.

Required:

A) Determine the impact research and development costs have on Katy Co's 2016, 2017, and 2018 income under (1) U.S. GAAP and (2) IFRS.

B) Summarize the difference in income, total assets, and total shareholder'sequity related to Product XYZ over its five-year life under under (1) U.S. GAAPand (2) IFRS.

1) The impact research and development costs have on Katy Co's 2016, 2017, and 2018income under (1) U.S. GAAP and (2) IFRS.Research and development costs totaling $200million in Year 2016 in a...