Iqbal Corporation uses the lower of FIFO cost and net realizable value method on an individual item

Question:

Iqbal uses the lower of FIFO cost and net realizable value method on an individual item basis, applying the direct method. The inventory at December 31, 2016, included product AG. Relevant per-unit data for product AG follow:
Estimated selling price ............................. $50
Cost .................................................... 45
Replacement cost ..................................... 51
Estimated selling expense ........................... 19
Normal profit .......................................... 14
There were 1,000 units of product AG on hand at December 31, 2016. Product AG was incorrectly valued at $35 per unit for reporting purposes. All 1,000 units were sold in 2017.
Instructions
Assume that Iqbal follows ASPE and answer the following questions.
(a) Was net income for 2016 overstated or understated? By how much? (Ignore income tax aspects.)
(b) Was net income for 2017 overstated or understated? By how much?
(c) Indicate whether the current ratio, , and debt to total assets ratio would be overstated, understated, or not affected for the years ended December 31, 2016, and December 31, 2017. Explain briefly.
(d) Assume that management did not discover the error in inventory until after the end of the fiscal year but before the closing entries were made and the were released. Should the adjustment be recorded? How would the error be treated if it were discovered after the were released?
(e) How would your responses above change if Iqbal followed IFRS?
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