Accelerated Earnings Inc $\begin{array}{llcc} \text {Dr } & \text { INVENTORY } &120,000\\\quad\quad \text {Cr. } & \text { GAIN ON INVENTORY }&&120,000\\\end{array}$

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:
$\begin{array}{llcc} \text {Dr } & \text { INVENTORY } &120,000\\\quad\quad \text {Cr. } & \text { GAIN ON INVENTORY }&&120,000\\\end{array}$
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?

Correct Answer:

Verified

a)The local bank is the user of the fina...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

View Full Answer For Free