At 31 March Tentacle had 12,000 units of product W32 in inventory, included at cost of $6 per unit. During April and May 20X7 units of W32 were being sold at a price of $5.40 each, with sales staff receiving a 15% commission on the sales price of the product.
At what amount should inventory of product W32 be recognized in the financial statements of Tentacle as at 31 March 20X7?
(a) $55,080
(b) $72,000
(c) $64,800
(d) $61,200
Answer per BPP:
NRV- (12,000 * (5.4 * 85%)= $55,080
I did use the NRV of $5.40 but I did not minus the sales staff commission.
Why did they minus it? Is that considered to be a cost to make the sale?
Thanks!
Ask the Tutor ACCA FR
BPP P&R Kit MCQ- Inventories and biological assets
NET realisable value - sale price less selling costs
OK?
Hi,
I have a question in above answer, why that's not taken as per the year end cost of the item.
Thanks,
Because subsequent events after date show that cost is overvalued and we need to go to nrv. These after-date sales are indications that inventory at the year end is overvalued - the sales are adjusting events
Thanks sir,
You're welcome
Sign in to reply to this topic.