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What is the closing inventory?
And what does “rectify the items” mean? Is it related to the items which cost $4,000 and we make an expense of $2,500 to make it legal and sell it again?Q: Inventories at the close of business on 31 December 20X9 were valued at cost of
$19,871. Included in this amount was an inventory line at a cost of $4,000 that, due
to change in legislation, is now illegal. Clerc could rectify the items at a cost of
$2,500 and plans to do so. The items usually retail to customers at $6,000. What is the closing inventory?Thanks!
Closing inventory is the inventory (stock) at the end of the financial year.
“Rectify” means correct. According to IAS 2, inventory must be valued at the lower of cost and net realisable value.
All of this is explained in my free lectures. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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