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The closing inventory at cost of a company at 31 January 20X3 amounted to $284,700.
The following items were included at cost in the total:
1. 400 coats, which had cost $80 each and normally sold for $150 each. Owing to a defect in manufacture, they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of the proceeds.
2. 800 skirts, which had cost $20 each. These too were found to be defective. Remedial work in February 20X3 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each.
What should the inventory value be according to IAS 2 “Inventories” after considering the above items?
I found the answer 279100 but the ans was 281200
1. For the coats, the total cost is 400 x $80 = $32,000. The net realisable value is 75 – (5% x 75) = $71.25, so a total of $28,500.
Therefore they are valued at $28,500 which is $3,500 less that the cost currently included in the total.2 For the skirts, the cost is 800 x $20 = $16,000. The net realisable value is (800 x (28 – 5)) – 800 = $17,600. Therefore they are valued at $16,000 and the current total does not need changing.
Therefore the correct value of the inventory is $284,700 – $3,500 = $281,200.
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