Lisali Company gathered the following information related to inventory that it owned on December 31, 2011:
Historical cost ......... $100,000
Replacement cost ....... 95,000
Net realizable value ...... 98,000
Normal profit margin ...... 20%
a. Determine the amount at which Lisali should carry inventory on the December 31, 2011, balance sheet and the amount, if any, that should be reported in net income related to this inventory using (1) U.S. GAAP and (2) IFRS.
b. Determine the adjustments that Lisali would make in 2011 to reconcile net income and stockholders’ equity under U.S. GAAP to IFRS.