Semester $3,$ August $2024$

Topic: Accounting Principles

ABC Manufacturing $Co.$ is preparing its financial statements for the year

ended December $31,2023.$ The company is considering the valuation of

its inventory and has the following information:

Inventory on Hand: $1,000$ units

Historical Cost per Unit: $$50$

Replacement Cost per Unit: $$45$

Net Realizable Value per Unit: $$48$

Normal Selling Price per Unit: $$52$

Estimated Selling Costs per Unit: $$5$

Question:

Using the conservatism principle, calculate the value at which the

inventory should be reported on the balance sheet as of December $31,$

XYZ Corporation is preparing its financial statements for the year ended

December $31,2023.$ The company has a policy that any item or error

amounting to $5\%$ or more of the net income before tax is considered

material. The following financial information is available:

Net Income before Tax: $$1,500,000$

Error Discovered in Inventory Valuation: $$70,000$

Question:

Determine whether the error in inventory valuation should be corrected in

the financial statements based on XYZ Corporation's materiality threshold.

GHI Corporation purchased a piece of land on January $1,2020,$ for$`$

$$300,000.$ The company is preparing its financial statements for the year

ended December $31,2023.$ During this period, the following events related

to the land occurred:

Market Value of Land as of December $31,2023$: $$450,000$

Property Tax Assessment Value as of December $31,2023$: $$400,000$

Cost of Land Improvements in $2022$: $$50,000$

Question:

Using the historical cost principle, determine the value at which the land

should be reported on GHI Corporation's balance sheet as of December

$31,2023.$ Should the market value or the property tax assessment value

be considered in the financial statements?