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Inventory on 31 May 2017 was valued at $357,000 based on its original cost. However, $35,000 of this inventory is now obsolete and the partners have agreed to sell it in June 2017 for a cash price of $25,000.
How will this close inventory will be written?
I am assuming that Closing inventory at SP/L will be credited as (357,000-35,000) for the SP/L ended at 31 May 2017.
How should I include 25,000 in Partnership statements?All you have to do is to value the closing inventory at the lower of cost and NRV. So here it would be valued at : 357,000 -10,000 = 347,000. The 10,000 writes down the obsolete inventory to it’s NRV.
Everything then takes care of itself when closing inventory is entered by:
Dr Closing stock 347,000
Cr Cost of sales 347,000.The lower stock value is properly shown in the SOFP and the profit will be 10,000 lower than it would have been.
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