Accelerated Earnings Inc

question 12

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:
Dr. INVENTORY 120,000
Cr. GAIN ON INVENTORY 120,000
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:

Key Values

Fundamental beliefs or standards that guide behaviors and decision-making within individuals or organizations.

Ideological Themes

Central beliefs or principles that form the basis of a political, economic, or social system or movement.

Systems Thinking

A holistic approach to analysis that focuses on the way that a system's constituent parts interrelate and how systems work over time and within the context of larger systems.

Interdependencies

Mutual reliance between entities, where the actions or outcomes of one entity depend on those of another.