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 that 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 % of selling price 20%
The entire inventory of Product Z that was on hand at December 31 Year 1 was completed in Year 2 at a cost of $ 1,800 and sold at a price of $ 17,150.
Required:
a. Use the information provided in this chapter related to the accounting for inventories to determine the impact on Year 1 and Year 2 income related to
Product Z (1) under IFRS and (2) under U. S. 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.