QUESTION 2: INVENTORY (5 points)

Net Income Difference using US GAAP and IFRS

Company ABC Co. provided the following information for the 2020 year ended.

Inventory Items	Model #	Replacement Cost	# Units	Selling Price	Disposal Cost	Profit Margin	Cost
A Red	AP 100X	$8	450	$14	$1	$6	$5
B Blue	BS100X	$14	300	35	2	18	16
C Pink	CC200X	$5	750	8	2	4	7
D Black	DC200X	$12	520	145	2	15	14

By how much the Net Income of the company that prepares its Financial Statements using IFRS differs from USGAAP? In other words, is Net Income using IFRS equal to, greater than, or less than USGAAP? Use individual analysis. Do not considered any tax rate effect. Consider the information in the table above to answer questions 1, 2 and 3.

Consider the following: a. The Net Income under USGAAP is $35,000 after considered a Loss of $2,000 due to inventory market decline in year 1. b. Ceteris paribus = Other things being equal. Assume Inventory valuation is the only difference between USGAAP and IFRS accounting system.

1. The Net Income using IFRS is: (select only one) greater than ___ less than___ or equal ___ than Net Income using USGAAP. (1 point)

2. Enter the difference you mention in #1 (if any): $ _______ (1 point)

3. Determine Net Income using IFRS. $ _________ (3 points)

Explanation and *calculations:

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*Calculations are required to receive points. Stop: Do not write below this line. (5 spaces)

QUESTION 3: ASSET REVALUATION: PPE (5 points)

Using IFRS: ARL Inc. is revaluing an Equipment with a carrying value of $715,000 to its fair value of $673,000. The original costs of the equipment were $1,000,000. The equipment has 10 years useful life and a residual value of $50,000. ARL uses straight line depreciation method.

Suppose that ABC revalued the equipment under IAS 16, the depreciation expense amount for the following years (after Revaluation) will.

1. Increased by $_____ , Decreased by $_____, It remains the same $______(Select only one)

(1 point)

Explanation and *calculations: (4 points)

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