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Bumi had 120 units of an item in inventory which were purchased some time ago at a cost of $1200.Immediately before the end of the financial year 20 units were soldbfor $180. Shortly after the year end a further 20 units were sold for $170 with $20 being incurred in deliviring the items to the customer.
At what amount should the items in inventory at the end the financial year be included in the financial statements?Please don’t simply set me test questions and expect an answer. You must have an answer in the same book in which you found the question. Ask about whatever it is in the answer that you are not clear about, and then I will help you.
The inventory should valued at the lower of cost or net realisable value. On the assumption that the 20 sold after the year end were representative of all the items in inventory (and we not, for example, damaged) then the inventory should be valued at (170-20)/20 per unit.
Have you watched my free lectures on inventory? 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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