Determine the amount of which katy co should report

Assignment Help Accounting Basics

Reference no: EM131894915

Problem

Katy Co. has three finished products (related to the three different product lines) in its ending inventory at December 31, 2017. The following table provides additional information about each product. Assuming that these three products related to three different product lines, grouping would not be allowed. Katy Co. expects to incur selling costs equal to 5% of the selling price of each of the products.

Product	Cost	RC	S. Price	S. Costs	Normal PM
X100	$235	$240	$250	10%	20%
X200	$180	$190	$210	10%	20%
X300	$160	$140	$190	10%	15%
Total	$575

We learned that, if inventory declines in value below its original cost, a company should write down the inventory to market to report the loss in both U.S. GAAP and IFRS and that the IFRS and U.S. defines the market differently. IFRS defines market as net realizable value. U.S. GAAP, on the other hand, defines market as replacement cost subject to the constraints of net realizable value (the ceiling) and net realizable value less a normal markup (the floor). IFRS does not use a ceiling or floor to determine market.

Required:

Determine the amount of which Katy Co. should report its inventory on the December 31, 2017 balance sheet under (a) U.S. GAAP and (2) IFRS.

Reference no: EM131894915

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