Chapter 4 Homework Answers (3nd)

Chapter 4 Homework Answers (3nd) - 3 years Annual...

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Chapter 4 Homework Assignment Answers Exercise 1 1. Monroe Company – Inventory IFRS U.S. GAAP Historical cost 20,00 0 Historical cost 20,000 Estimated selling price 17,000 Replacement cost 14,00 0 Costs to complete and sell 2,000 Net realizable value 15,00 0 Net realizable value 15,000 Normal profit margin 20% Inventory loss 5,000 NRV - profit margin 12,00 0 Market 14,000 Inventory loss 6,00 0 a. (1) IFRS: Year 1 Inventory loss $5,000 Year 2 Cost of goods sold $16,800 (2) U.S. GAAP: Year 1 Inventory loss $6,000 Year 2 Cost of goods sold $15,800 b. Year 1: IFRS result in $1,000 larger income before tax, assets, and stockholders’ equity. Year 2: IFRS result in $1,000 smaller income before tax; assets and stockholders’ equity are the same at the end of Year 2 under both IFRS and U.S. GAAP. Problem 3 Jefferson Company – Property, Plant and Equipment (measurement subsequent to acquisition) Cost, 1/2/Y1 $10,000,000 Useful life 5 years Annual depreciation $2,000,000 Book value, 12/31/Y2 $6,000,000 IFRS Allowed Alternative Fair value, 1/2/Y3 $12,000,000 Remaining useful life
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Unformatted text preview: 3 years Annual depreciation $4,000,000 a. Depreciation expense IFRS U.S. GAAP Years 1 and 2 $2,000,000 $2,000,000 Years 3, 4, and 5 $4,000,000 $2,000,000 Income before tax is the same under IFRS and U.S. GAAP in Years 1 and 2. Income before tax is $2,000,000 smaller under IFRS in Years 3, 4, and 5. b. End of Year Equipment (book value) 1 2 3 4 5 IFRS Beginning $10 m $8 m $6 m $8 m $4 m Revaluation 6 m Depreciation expense (2 m) (2 m) (4 m) (4 m) (4 m) Ending $8 m $6 m $8 m $4 m $0 U.S. GAAP Beginning $10 m $8 m $6 m $4 m $2 m Depreciation expense (2 m) (2 m) (2 m) (2 m) (2 m) Ending $8 m $6 m $4 m $2 m $0 End of Year Stockholders equity 1 2 3 4 5 IFRS Beginning $0 ($2 m) ($4 m) ($2 m) ($6 m) Revaluation $6 m Depreciation expense ($2 m) ($2 m) ($4 m) ($4 m) ($4 m) Ending ($2 m) ($4 m) ($2 m) ($6 m) ($10 m) U.S. GAAP Beginning $0 ($2 m) ($4 m) ($6 m) ($8 m) Depreciation expense ($2 m) ($2 m) ($2 m) ($2 m) ($2 m) Ending ($2 m) ($4 m) ($6 m) ($8 m) ($10 m)...
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This note was uploaded on 10/07/2011 for the course ACCOUNTING 4220 taught by Professor Brown during the Spring '11 term at UMBC.

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Chapter 4 Homework Answers (3nd) - 3 years Annual...

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