Background

Tarheel Farm, Inc. (TFI) is a corporation involved in agricultural production and has a June 30 financial year-end. It is not publicly traded, but is needed to make annual financial statements for its bank. Historically, the bank has required that these statements obey with US GAAP rules. At present, the bank is allowing its clients to report using IFRS instead of US GAAP, if they prefer. TFI typically produces three products: beef cattle, corn and winter wheat. Recently, TFI also started growing a number of hibiscus plants. All four of these products have a life cycle of less than one year. The following information is available as of June 30:

TFI had 400 acres of field corn planted. The corn would not be harvested till the fall. The accumulated cost of the corn is $95,000. The estimated selling costs are $4,500. The present land costs are $5,000 per acre. Even though there is no present market value available for land growing a corn crop on it, TFI is certain that this land will sell for more than $2,200,000.

TFI had 6,000 bushels of winter wheat harvested and stored in its grain bins. The collected cost of the wheat is $27,000. The present market price at the local elevator is $6.10 per bushel. The market price of wheat has increased 10 cents per bushel as the wheat was harvested. The transportation costs from the farm to the elevator are about 5 cents per bushel.

TFI had a herd of cattle, including heifers and steers which have not yet been weaned. TFI does not anticipate keeping any of the heifers for its breeding herd. The accumulated cost of the heifers and steers was $50,000. The expected selling costs were $2,000. The livestock’s local market price for these heifers and steers was $70,000.

At last, TFI has 500 hibiscus plants. The accumulated costs are $10 per plant and TFI does not anticipate any important selling costs. Due to the rarity of this beautiful plant, there is no local market for this product. TFI sold some of these plants two months ago for $25 a plant. TFI does not believe that the market for this product has changed significantly since that time.

Required

1) find out the inventory valuation for TFI on June 30 using both US GAAP and IFRS.

2) Provide an analysis of what costs are specifically included and excluded in inventory for both US GAAP and IFRS. You can ignore issues of interest capitalization into inventory.