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Hi
I am working on multi-task question and I came across this information given for the preparation of the financial.
The inventories at the close of business on 31 December 2009 were valued at cost of $ 19871.Include in this balance was an inventory line costing $4000 that, due to the change in legislation in now illegal. Clerc could rectify the items at a cost of $ 2,500 and plans to do so. The items usually retail to customer at $6000.
Additional information given in the question.
Opening inventory 17331
Purchase 130562Working
Opening inventory 17331
Purchase 130562Less closing inventory
(19871- (4000-3500) ( 19371)Cost of sale 128522
Could you please explain to me how to get (4000-3500) figure?
No problem at all about 4000 but I could not figure out 3500.Thanks a lot
Gabbi
The inventory should be valued at the lower of cost and net realisable value.
The net realisable value is the final selling price less any extra costs that there will be. In this case, the NRV is 6000 – 2500 = 3500
Hi John
With the explanation everything makes more sense.
Once again, thanks a lotGabry
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