8-76 CHAPTER Inventory CPsukier Specialty Corp, adivision of F lnc, manufactures three models of bicycle gearshift compo nents that are sold so bicycle manufacturers, retailers, and catalogue outlets. Since beginning operations in 1969, Sier has used normal abworption costing and has asumed a first-in, first out cost Bow in its per petual imventory system Except for overhead, manufacturing costs are accumalated using actual costs. Overhead is applied to production using predetermined overhead rates. The balances of the inventory accounts at the end of Sier's flscal year, September 30, 2020, Bollow. The inventories are stated at cont before any yearend adjustments 30pls Finished goods Work in process Raw materials Factory supplies The following information relates to Sler's imventory and operstions $757,000 192.500 300,000 69,0004 1. The finished goods inventory consists of these items Net realizable value Cost Down tube shiher Standard model Click adjustment model Deluxe model Total down tube shifters Bar end shifter Standard model Click adjustment model $97,500 s 67,000 94,500 87,000 108,000 110,000 300,000 264.000 133,000 79,000 212,000 120,050 108,150 Total bar end shifters Head tube shifter Standard model Click adjustment model 228,200 103,650 145,300 128.000 117,000- Total head tube shifters 248,950 245,000- Total finished goods $741.150 $757,000 2. Half of the finished goods inventory of head tube shifters is at catalogue outlets on consignment. 3. Three quarters of the finished goods inventory of bar end shifters has been pledged as collateral for a bank loan. 4. Half of the raw materials balance is for derailleurs acquired at a contracted price that is 20% above the current market price. The net realizable value of the rest of the raw materials is $135,500. 5. The total net realizable value of the work-in-process inventory is $105,500 6. Included in the cost of factory sapplies are obsolete items with a historical cost of $4,200. The net realizable value of the remaining factory supplies is $65,900. 7. Sier applies the lower of cost and net realizable value method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Sier applies the lower of cost and net realizable value method to the total of each inventory account. 8. Consider all of the amounts presented above as being material amounts in relation to Sier's financial statements as a whole Instructions a. Assuming that ASPE is followed, prepare the inventory section of Sier's statement of financial posi- tion as at September 30, 2020, including any required note(s). b. Regardless of your answer to part (a), assume that the net realizable value of Sier's inventories is less than cost. Explain how this decline would be presented in Sier's income statement for the fiscal year ended September 30, 2020, under ASPE c. Assume that Sier has a firm purchase commitment for the same type of derailleur that is included in the raw materials inventory as at September 30, 2020, and that the purchase commitment is at a contracted price that is 15% higher than the current market price. These derailleurs are to be delivered to Sier after September 30, 2020. Discuss the impact, if any, that this purchase com- mitment would have on Sier's financial statements prepared for the fiscal year ended September 30, 2020, under ASPE. d. How would your response to part (c) change under IFRS? Explain and compare the disclosure requirements under ASPE and IFRS e. 8-76 CHAPTER Inventory CPsukier Specialty Corp, adivision of F lnc, manufactures three models of bicycle gearshift compo nents that are sold so bicycle manufacturers, retailers, and catalogue outlets. Since beginning operations in 1969, Sier has used normal abworption costing and has asumed a first-in, first out cost Bow in its per petual imventory system Except for overhead, manufacturing costs are accumalated using actual costs. Overhead is applied to production using predetermined overhead rates. The balances of the inventory accounts at the end of Sier's flscal year, September 30, 2020, Bollow. The inventories are stated at cont before any yearend adjustments 30pls Finished goods Work in process Raw materials Factory supplies The following information relates to Sler's imventory and operstions $757,000 192.500 300,000 69,0004 1. The finished goods inventory consists of these items Net realizable value Cost Down tube shiher Standard model Click adjustment model Deluxe model Total down tube shifters Bar end shifter Standard model Click adjustment model $97,500 s 67,000 94,500 87,000 108,000 110,000 300,000 264.000 133,000 79,000 212,000 120,050 108,150 Total bar end shifters Head tube shifter Standard model Click adjustment model 228,200 103,650 145,300 128.000 117,000- Total head tube shifters 248,950 245,000- Total finished goods $741.150 $757,000 2. Half of the finished goods inventory of head tube shifters is at catalogue outlets on consignment. 3. Three quarters of the finished goods inventory of bar end shifters has been pledged as collateral for a bank loan. 4. Half of the raw materials balance is for derailleurs acquired at a contracted price that is 20% above the current market price. The net realizable value of the rest of the raw materials is $135,500. 5. The total net realizable value of the work-in-process inventory is $105,500 6. Included in the cost of factory sapplies are obsolete items with a historical cost of $4,200. The net realizable value of the remaining factory supplies is $65,900. 7. Sier applies the lower of cost and net realizable value method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Sier applies the lower of cost and net realizable value method to the total of each inventory account. 8. Consider all of the amounts presented above as being material amounts in relation to Sier's financial statements as a whole Instructions a. Assuming that ASPE is followed, prepare the inventory section of Sier's statement of financial posi- tion as at September 30, 2020, including any required note(s). b. Regardless of your answer to part (a), assume that the net realizable value of Sier's inventories is less than cost. Explain how this decline would be presented in Sier's income statement for the fiscal year ended September 30, 2020, under ASPE c. Assume that Sier has a firm purchase commitment for the same type of derailleur that is included in the raw materials inventory as at September 30, 2020, and that the purchase commitment is at a contracted price that is 15% higher than the current market price. These derailleurs are to be delivered to Sier after September 30, 2020. Discuss the impact, if any, that this purchase com- mitment would have on Sier's financial statements prepared for the fiscal year ended September 30, 2020, under ASPE. d. How would your response to part (c) change under IFRS? Explain and compare the disclosure requirements under ASPE and IFRS e