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Inventory

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

  • This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • August 8, 2016 at 10:06 pm #332117
    firelion28
    Member
    • Topics: 159
    • Replies: 83
    • ☆☆☆

    What would be the effect on a company’s profit for the year of discovering inventory with cost of 1250 and a net realisable value of 1000 assuming that this item of inventory had not been included in the original inventory count?

    A an increase of 1250
    B an increase of 1000
    C a decrease of 250
    D no effect

    Sir I am unable to understand this question and how I should proceed

    Pls help

    August 9, 2016 at 6:15 am #332152
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    You have obviously not been watching my free lectures – they are a complete course for Paper F3 and I cannot possibly type them all out here!!

    You need to read the provisions of IAS2 – inventory has to be valued at the lower of cost and NRV.

    August 9, 2016 at 8:05 am #332171
    firelion28
    Member
    • Topics: 159
    • Replies: 83
    • ☆☆☆

    SO sir wont there be an decrease in profit??

    August 9, 2016 at 2:57 pm #332211
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    No. The inventory has not been included, so inventory needs increasing.

    Higher inventory means lower cost of sales and therefore higher profit.

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