19. Leah uses the lower-of-cost-or-market method on an individual-tem basis, in

Question

19. Leah uses the lower-of-cost-or-market method on an individual-tem basis, in pricing her inventory items. Use the following information to determine the amount of Leah should value this inventory using U.S. GAAP Cost Replacement cost Net realizable value NRV - Normal profit $150 $130 $160 $120 20. Leah uses the lower-of-cost-or-market method on an individual-tem basis, in pricing her inventory items. Use the following information to determine the amount of Leah should value this inventory using IFRS. 5--Final A--Intermediate A I, December 2014 $150 $120 $160 $130 Cost Replacement cost Net realizable value NRV - Normal profift a. S150 b. $120 c. $160 d. $130 e. None of the above

Explanation / Answer

Answer 19

Lower-of-cost-or-market method for inventory Under US GAAP.

Note : Under US GAAP measurement of carrying amount of inventory is calculated as lower-of-cost-or-market . where , replacemet cost is generally the market value expect in following two conditions:

In the present question , Replacement cost is between floor limit of $120 & cealing limit of $160 thus market value = the replacement cost = $130 & cost of the inventory = $150

Value of Inventory using Lower-of-cost-or-market method under US GAAP. = $130

Answer 20

Lower-of-cost-or-market method for inventory Under IFRS.

Note : Under IFRS measurement of carrying amount of inventory is calculated as lower-of-cost-or-net realizable value .

In the present qustion , net realizable value = $160 & cost of inventory = $150

Value of Inventory under IFRS = $150 (option a.)

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