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John Moffat.
John Moffat.-
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firelion28
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The inventory counters of crocodile co infrom that there are 6000 products of A and 2000 products of B, these cost 10 and 5 each resp. They also tell
A- 500 of these were found to be defective and would be sold at a cut price of 8
B- 100 of these were to be sold for 4.50 and selling expesnes of 1.5 eachwhat should be the value of inventory.
the cost for A is 10 and nrv is 8, and cost for B is 4.5 and nrv is 3.5
i am confused whether should i value only the 500 at 8 or the entire 6000 at 8
similiary shoulld i value the entire 2000 at 3.5 or only the 100 and the rest at 5
John Moffat
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Firstly, on the figures as you have typed them, the NRV of B is 4.5 – 1.5 = 3 (not 3.5).
For A, there is no question. 500 of them are defective (and will be valued at $8), and therefore the other 5,500 are presumably OK and they will be valued at the cost of $10.
For B, the question is not very good. The 100 will definitely be valued at the NRV of $3.
The problem is as regards the remaining 1,900 because it depends whether they expect to sell them at the same low price or at a price higher than cost. It would be strange to have to sell 100 of them cheaply and the rest at a higher price (unless the 100 are defective as well in some way).I have asked you before – why are you attempting questions for which you do not have an answer? (If you do have an answer then you should be asking about what it is in the answer that you do not understand!)
alescurti
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if a company is using fifo for valuation of inventory, supossing value 1/1/200x is 45000 $
then during year they decide to move to AVC , we will have purchases during year and a closing inventory estimated based on AVC.
in order to have the COGS shall we recalculate also the open inventory at AVC or there is no need?
thanksJohn Moffat
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There is no rule.
But if they do change their accounting policy, then they do need a note explaining that they have changed, and why, and stating the effect on the profits of the change (i.e. the difference there would have been if they had not changed).
alescurti
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Thanks a lot!
this was my point apart of disclosure there is no rule forcing company to recalcuate also the O.I. , i was jus scared to compare apples with pears.thanks again
John Moffat
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You are welcome 🙂
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