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Dear Tutor,
Sorry to trouble you again with this question, which appeared in the Inventory subject -Practice Questions – At amount should Inventory be stated in the statement of Financial Position? One of the books, quantity 3900, Unit Cost $8, Selling price/unit $8.5, Selling Costs/unit -$1.5, why its inventory valued as 3900 X (8.5-1.5) = 27300 rather than 3900 X$8 =31200?
Thank you very much.
Hi,
Remember that inventory is valued at the lower of cost and NRV. The NRV is the selling price less the selling cost. So the NRV in this question is $8.5 less $1.5, which gives $7. This is lower than the cost of $8 and so we value the inventory at its NRV of $7 per unit.
Thanks
Chris
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