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At 30 September 2012, the closing inventory of a company amounted to $386,400.
The following items were included in this total, at cost:
1) 1,000 items which had cost $18 each. These items were all sold in October 2012 for $15 each, with selling expenses of $800.2) 5 items which had been in inventory since 1978 when they had been purchased for $100 each, were sold in October 2012 for $1,000 each, net of selling expenses.
What figure for inventory should appear in the company’s Statement of financial position at 30 September 2012?
what i have difficulty understanding is we are preparing the accounts at 30th sep 2012 and these items were sold the next month
so how is the answer 382600?
thanks again
If you watch the free lecture on inventories you will see that we have to value inventory at the lower of cost and expected net realisable values.
Item 1 has a cost of 18,000. However their net realisable value is only 14,200.
Therefore they have to be valued at 3,800 less that they are currently valued.Therefore inventory should be valued at 386,400 – 3,800 = 382,600
(They were sold in the next month. Had they been sold before the end of September they would not have been in inventory at all!! All the matters is that at the end of September their sales value was less than their cost.)
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