The following information refer to inventory item A of Company XYZ on December 31, Year 1.

• Historical cost $200,000
• Replacement cost $100,000
• Estimated selling price $170,000
• Estimated cost to complete and sell $20,000
• Normal profit margin (as % of net realizable value) 20%

Instructions:

a) Determine the net realizable value (NRV) for inventory item A. Determine the lower-of-cost-or-net-realizable-value

(LCNRV) under IFRS.

b) Under IFRS rules, provide the write-down journal entry for inventory item A in Year 1 if a write-down is necessary.

c) Determine the market value for inventory item A under the US GAAP lower-of-cost-or-market rule for inventories.

Determine the lower-of-cost-or-market (LCM) under US GAAP.

d) Under US GAAP rules, provide the write-down journal entry for inventory item A in Year 1 if a write-down is

necessary.

e) Assume that the selling price increases to $180,000 in Year 2, provide the reversal of write-down journal entry under

IFRS if a reversal is necessary.