question archive Question 2 Pronghorn Corporation uses the lower of FIFO cost and net realizable value method on an individual item basis, applying the direct method
Question 2 Pronghorn Corporation uses the lower of FIFO cost and net realizable value method on an individual item basis, applying the direct method
Subject:FinancePrice: Bought3
Question 2
Pronghorn Corporation uses the lower of FIFO cost and net realizable value method on an individual item basis, applying the direct method. The inventory at December 31, 2016, included product AG. Relevant per-unit data for product AG follow:
Estimated selling price $54Cost 49Replacement cost 56Estimated selling expense 23Normal profit 18
There were 1,600 units of product AG on hand at December 31, 2016. Product AG was incorrectly valued at $35 per unit for reporting purposes. All 1,600 units were sold in 2017.
Assume that Pronghorn follows ASPE and answer the following questions.
(a)
Was net income for 2016 overstated or understated? By how much (ignore income tax aspects)?
Net income for 2016 is
