Sube Specialty Corp., a division of FH Inc., manufactures three models of gearshift components for bicycles that are sold to bicycle manufacturers, retailers, and catalogue outlets. Since beginning operations in 1969, Sube has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. Except for overhead, manufacturing costs are accumulated using actual costs. Overhead is applied to production using predetermined overhead rates. The balances of the inventory accounts at the end of Sube's fiscal year, September 30, 2014, follow. The inventories are stated at cost before any year-end adjustments.

The following information relates to Sube's inventory and operations:
1. The fmished goods inventory consists of these items:

2. Half of the finished goods inventory of head tube shifters is at catalogue outlets on consignment.
3. Three-quaners of the finished goods inventory of bar end shifters has been pledged as collateral for a bank loan.
4. Half of the raw materials balance is for derailleurs acquired at a contracted price that is 20% above the current market price. The net realizable value of the rest of the raw materials is $135,500.
5. The total net realizable value of the work-in-process inventory is $105,500.
6. Included in the cost of factory supplies are obsolete items with a historical cost of $4,200. The net realizable value of the remaining factory supplies is $65,900.
7. Sube applies the lower of cost and net realizable value method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Sube applies the lower of cost and net realizable value method to the total of each inventory account.
8. Consider all of the amounts presented above as being material amounts in relation to Sube€™s; financial statements as a whole.
Instructions
(a) Assuming that ASPE is followed, prepare the inventory section of Sube's statement of financial position as at September 30, 2014, including any required note(s).
(b) Regardless of your answer to (a), assun1e that the net realizable value of Sube€™s; inventories is less than cost. Explain how this decline would be presented in Sube's income statement for the fiscal year ended September 30, 2014, under ASPE.
(c) Assume that Sube has a firm purchase commitment for the same type of derailleur that is included in the raw materials inventory as at September 30, 2014, and that the purchase commitment is at a contracted price that is 15% higher than the current market price. These derailleurs are to be delivered to Sube after September 30, 2014.
Discuss the impact, if any, that this purchase commitment would have on Sube's financial statements prepared for the fiscal year ended September 30,2014, under ASPE.
(d) How would your response to (c) change under IFRS?
(e) Explain and compare the disclosure requirements under ASPE and IFRS.

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Finished goods Work in process Raw materials Factory supplies $757,000 192,500 300,000 69,000 Cost Net realizable value Down tube shifter Standard model Click adjustment model Deluxe model 97,500 94,500 108,000 300,000 67,000 87,000 110,000 264,000 Total down tube shifters Bar end shifter Standard model Click adjustment model 133,000 79,000 212,000 120,050 108,150 228.200 Total bar end shifters Head tube shifter Standard model Click adjustment model 128,000 117,000 245,000 103,650 145,300 248,950 $741,150 Total head tube shifters Total finished goods $757,000