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Inventory at a warehouse was valued at its cost of $460,000 at the yr end but later on 70%of it was sold for$ 238000.so how would we write it down?would we compare 70% cost with the nrv or the full cost vs the nrv?
70% of 460,000 is 322,000. So, of the 460,000, 322,000 can be sold for only 238,000. The remainder of the inventory valued at cost at an amount of 138,000 ( subject to that not also requiring a write-down ) is presumably correctly valued. The adjusted value of inventory should therefore be 138,000 + 238,000 = a revised value of 376,000 instead of 460,000.
However ……. if the cause of the fall in value was due to some “subsequent event” not foreseeable as at the year end, then the 460,000 was presumably correct and the cause of the fall would be shown as a non-adjusting subsequent event – assuming that it is material in the context of the financial statements
But in the qs Waxwork (6/09) ,bpp kit has directly compared the whole of the460k with the 70%sold 🙁
The question you are referring to states that the inventory is all of the same class, thus telling you that the NRV of the remaining inventory also needs to be written down.
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