acct hw 4

Question 1 The following information refer to inventory item A of Company XYZ on December 31, Year 1.

Historical cost $200,000 Replacement cost $100,000 Estimated selling price $170,000 Estimated cost to complete and sell $20,000 Normal profit margin (as % of net realizable value) 20%

Instructions: a) Determine the net realizable value (NRV) for inventory item A. Determine the lower-of-cost-or-net-realizable-value

(LCNRV) under IFRS. b) Under IFRS rules, provide the write-down journal entry for inventory item A in Year 1 if a write-down is necessary. c) Determine the market value for inventory item A under the US GAAP lower-of-cost-or-market rule for inventories.

Determine the lower-of-cost-or-market (LCM) under US GAAP. d) Under US GAAP rules, provide the write-down journal entry for inventory item A in Year 1 if a write-down is

necessary. e) Assume that the selling price increases to $180,000 in Year 2, provide the reversal of write-down journal entry under

IFRS if a reversal is necessary.

Question 2 Company ABC constructed a new factory at a cost of $2,000,000. The company also purchased new machinery and equipment at a cost of $200,000. The company spent another $10,000 to configure and bring the machinery and equipment into working condition. The company estimates that the cost to dismantle and remove the factory and machinery after 10-year of use will be $100,000 and $50,000, respectively. Instruction: a) Calculate the present value factor with an annual discount rate of 5% for 10 years. b) Determine the total cost of the new factory (including estimated dismantling and removal). c) Determine the total cost of the new machinery and equipment (including estimated dismantling and removal). d) Provide the journal entry to record the initial recognition of costs for the new factory and machinery.