To determine the amount at which inventory should be reported on the December 31, Year 1 balance sheet, Monroe Company compiles the following information for its inventory of product z on hand at the date:
Historical cost.....................................................................$20,000
Replacement cost................................................................$14,000
Estimated selling price.........................................................$17,000
Estimated costs to complete and sell...................................2,000
Normal profit margin as a percentage of selling price.........20%
The entire inventory of product Z that was on hand at Dec. 31, Year 1 was completed in Year 2 at cost of $1,800 and sold at a price of $17,150.
a. Det. the impact that Product Z has on income in Year 1 and Year 2 under IFRS and US GAAP
b. Summarize the difference in income, total assets, and total stockholders' equity using the two different sets of accounting rules over the two year period.