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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 9 years ago by John Moffat.
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  • March 3, 2016 at 3:31 am #303136
    abrizni10
    Member
    • Topics: 55
    • Replies: 49
    • ☆☆

    Sir I’m quite struggling in this question.

    At the year end a company discovers that some inventory is damaged.
    This inventory originally cost $2000 and to replace it would now cost $1900.
    It would normally sell for $2400 but can now only be sold for $2200 if repairs costing $400 are undertaken.
    At what value should the damaged inventory be shown in the financial statements?

    March 3, 2016 at 8:09 am #303172
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    Inventory must be valued at the lower of cost and net realisable value.

    The cost is $2,000.
    The net realisable value is 2,200 – 400 = $1,800.

    Therefore it should be valued at $1,800.

    I do suggest that you watch our free lectures on inventory where this rule is explained.

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