Check your answer
Write your response and explain your reasoning.
Northstar's draft note states:
Inventory is $150,000 and is stated at the lower of cost or market using FIFO. Inventory write-downs were $1,800.
The close file lists $96,000 merchandise under FIFO, $24,000 service parts under LIFO, and a $30,000 average-cost retail-method pool. A same-date and same-scope comparison shows $44,000 under FIFO and $36,500 under LIFO. Supported write-down schedules show $1,800 for merchandise and $1,200 for service parts.
Reconcile the class total, LIFO reserve, and write-down total. Map each policy claim to the correct population, ledger, and workpaper. Identify unsupported or incomplete language. Then list the current US-GAAP research and evidence needed before release. Keep any IAS 2 comparison in a separate column and state why a word substitution cannot produce a reporting-basis conversion.
Compare your reasoning with the worked answer
Merchandise of $96,000, service parts of $24,000, and the retail pool of $30,000 total $150,000. The same-scope FIFO comparison of $44,000 less the $36,500 LIFO amount gives a $7,500 reserve. The $1,800 and $1,200 write-downs total $3,000, so the draft's $1,800 statement omits one supplied population.
The policy sentence is unsupported. Northstar uses FIFO for merchandise, LIFO for service parts, and an average-cost retail method for the store pool. Each population needs a tie among its class amount, approved method, measurement path, ledger, and workpaper. The reviewer must research current disclosure requirements, materiality, estimates, commitments, pledges, and other entity facts before release.
A separate IAS 2 column must address method eligibility, measurement, reversals, tax, transition, and opening-policy effects. Replacing a US-GAAP phrase with "IAS 2" would not establish converted amounts or compliance.