The Following Information Pertains to Inventory Held by a Company

question 25

Multiple Choice

The following information pertains to inventory held by a company on December 31, 2013. As a result of inventory loss, what is the difference in income between reporting using U.S. GAAP and IFRS?

• A) U.S. GAAP income is $3,000 higher.
• B) U.S. GAAP income is $10,000 lower.
• C) IFRS income is $8,400 higher.
• D) IFRS income is $3,000 lower.
• E) IFRS income is $5,400 higher.

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing a product, which includes costs not directly tied to the product such as maintenance, utilities, and supervisor salaries.

Underapplied Manufacturing Overhead

Refers to the situation when the allocated manufacturing overhead costs are less than the actual overhead costs incurred.

Manufacturing Overhead Control

A way of monitoring and managing the costs associated with the indirect elements of production, such as utilities, maintenance, and factory supplies.

Overhead Costs

All costs on the income statement except for direct labor, direct materials, and direct expenses, covering expenses like rent, utilities, and insurance.