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inventory

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › inventory

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
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  • July 9, 2020 at 7:26 pm #576454
    ketki15
    Member
    • Topics: 60
    • Replies: 15
    • ☆☆

    percy pilbeam is a book wholesaler. on each sales commission of 4% is payable to the selling agent. the following info is avaiable in respect of total inventories of three of his most popular titles
    henry cost 2280 selling pr 2900
    dissuasion cost 4080 sp 4000
    pilgrim cost 1280 sp 1300

    acc to nrvr, we should calculate as 2280+4000+1280
    why have they solved as 2280+3840+1248?

    July 10, 2020 at 8:52 am #576497
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    We value each item of inventory at the lower of cost and net realisable value.

    The net realisable values in each case are the selling price less the 4% commission that will have to be paid.

    In the case of the second two items, the NRV’s are therefore 2,840 and 1,248 which in both cases are lower than the cost.

    Have you watched my free lectures on the valuation of inventory? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.

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