Optiplex Corporation: Differences Between GAAP and IFRS Assignment Instructions Respond to the following questions. The
problems should be solved on the basis of IFRS unless otherwise stated. Chapter 4 Question As a result of a downturn in the economy, Optiplex Corporation has
excess productive capacity. On January 1, Year 3, Optiplex signed a
special order contract to manufacture custom-design generators for a new
customer. The customer requests that the generators be ready for pickup
by June 15, Year 3, and guarantees it will take possession of the
generators by July 15, Year 3. Optiplex incurred the following direct
costs related to the custom-design generators:
Direct Costs for Custom-Design Generators
Cost to complete the design of the generators
Purchase price for materials and parts
Transportation cost to get materials and parts to manufacturing facility
Direct labor (10,000 labor hours at $12 per hour)
Cost to store finished product (from June 15 to June 30)
Because of the company’s inexperience in manufacturing generators
of this design, the cost of materials and parts included an abnormal
amount of waste totaling 5,000 dollars. In addition to direct costs,
Optiplex applies variable and fixed overhead to inventory using
predetermined rates. The variable overhead rate is 2 dollars per direct
labor hour. The fixed overhead rate based on a normal level of
production is 6 dollars per direct labor hour. Given the decreased level
of production expected in Year 3, Optiplex estimates a fixed overhead
application rate of 9 dollars per direct labor hour in Year 3. Determine the amount at which the inventory of custom-design
generators should be reported on Optiplex Corporation’s June 30, Year 3,
balance sheet. Chapter 5 Question SC Masterpiece Inc. granted 1,000 stock options to certain sales
employees on January 1, Year 1. The options vest at the end of 3 years
(cliff vesting) but are conditional upon selling 20,000 cases of
barbecue sauce over the 3-year service period. The grant-date fair value
of each option is 30 dollars. No forfeitures are expected to occur. The
company is expensing the cost of the options on a straight-line basis
over the 3-year period at 10,000 dollars per year (1,000 options X $30
divided by 3 = $10,000). On January 1, Year 2, the company’s management
believes the original sales target of 20,000 units will not be met
because only 5,000 cases were sold in Year 1. Management modifies the
sales target for the options to vest to 15,000 units, which it believes
is reasonably achievable. The fair value of each option at January 1,
Year 2, is 28 dollars. Determine the amount to be recognized as compensation expense in
Year 1, Year 2, and Year 3 under (a) IFRS and (b) U.S. GAAP. Prepare the
necessary journal entries. Submission Requirements Your paper should meet the following requirements: Written communication: Written communication is free of errors that detract from the overall message.APA formatting: Resources and citations are formatted according to current APA style and formatting.Font and font size: Times New Roman, 12 point.
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