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Sir could you please explain the treatment of fair value in SPL
– inventory of $800,000 had a fairvalue of $1m. All of this had been sold by 30/09/X6.
why is the fair value amount (200,000) added to the calculation of Cost of sales?
Hi,
The inventory is adjusted to fair value on acquisition, hence we need to increase its value/cost from the $800,000 to the $1,000,000. This involves and increase of $200,000, being the difference, and is taken to C’o’S as that is where we record the cost of inventory.
Thanks
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