Mars, Inc Follows IFRS for Its External Financial Reporting, While Jerome

question 64

Short Answer

Mars, Inc. follows IFRS for its external financial reporting, while Jerome Company uses U.S. GAAP for its external financial reporting. During the year ended December 31, 2015, both companies changed from using the completed-contract method of revenue recognition for long-term construction contracts to the percentage-of-completion method. Both companies experienced an indirect effect, related to increased profit-sharing payments in 2015, of $30,000. As a result of this change, how much expense related to the profit-sharing payment must be recognized by each company on the income statement for the year ended December 31, 2015?

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Definitions:

Monopoly Power

The ability of a monopoly (a single seller in the market) to control market prices for its product or service, often resulting in higher prices and lower output than in competitive markets.

Public Education

Public education refers to the schooling system that is financed and operated by government agencies to provide free education to all students.

Wealth Distribution

The manner in which wealth is shared among the members of a community or society.

Income Inequality

The uneven distribution of income within a population, leading to disparities in wealth and economic opportunities.