Accelerated Earnings Inc

question 45

Essay

Accelerated Earnings Inc.(Company)has an operating line of credit with the local bank that is secured by accounts receivable and inventory.
The Company purchased inventory whenever the price was low during the year and has a substantial amount on hand at year end.The inventory price has increased substantially at year end.The Controller recorded the following journal at year end:

Required:
a)Who are the users of the Company's financial statements and what is their informational need?
b)What part of the IFRS Conceptual Framework is violated by this journal entry?
c)What is the impact of this journal entry on the Company's users?
d)What correction is required?

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, free entry and exit, and a product that is considered perfectly homogeneous, leading to firms being price takers.

Average Total Cost

The total cost of production divided by the quantity produced, representing the per unit cost of production.

Industry Supply

The total amount of a product or service that is available for purchase within an industry.

Perfectly Competitive

A market structure where many firms sell identical products, there are no barriers to entry or exit, and no single buyer or seller can influence the market price.