Madison Company acquired a depreciable asset at the beginning of Year 1 at a a cost of 12million $.At December 31, Year1, Madison gathered the following information related to this asset.
Carrying amount.............................................................. $10 million
Fair value of the asset(net selling price).......................... .$7.5 million
Sum of future cash flows from use of the asset................ $10 million
Present value of future cash flows from use of the asset... $8 million
Remaining useful life of the asset...................................... 5 years
a. Determine the impact on Year2 and Year3 income from the depreciation and possible impairment of this equipment under IFRS and US GAAP.
b. Determine the difference in income, total assets and total stockholders' equity for the period of Years 1-6 under the two different sets of accounting rules.