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Please help me with this question below:-
At 30 September 20X3 the closing inventory of a company amounted to $386400.
The following items were included in this total at cost:
1- 1000 items which had cost $18 each.These items were all sold in October 20X3 for $15 each, with selling expenses of $ 800.2- 5 items which had been in inventory since 19W3,when they were purchased for $100 each, sold in October 20X3 for $ 1000 each, net of selling expenses.
sorry i missed the question:
What figure should appear in the company’s statement of financial position at 30 September 20X3 for inventory?
In each case, they should be valued at the lower of cost and NRV.
For (1): Cost is 1000 x 18 = 18,000; NRV is (1000 x 15) – 800 = 14,200.
So these should be valued at 14,200. But they are included in the total at cost of 18,000.
So we need to reduce the total by the difference of 3,800.For (2): Cost is 100 each; NRV is 1,000 each. So it is correct to value these at cost and the total does not need adjusting.
So…..the only change to make to the total is for (1), and the correct total is 386400 – 3800 = 382600
Therefore i can see that the 2nd part is irrelevant since it does not contribute to the ans at all but what i can’t figure out is that why don’t we take it into consideration?doesn’t it further decreases the inventory?
The question says that both sets of items have been included at cost.
The second one should be at cost and so that has been included correctly and no adjustment is necessary.
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