- March 23, 2019 at 8:50 am #510126sguhaMember
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Bpp question 208
At 31 March 20X7 Tentacle had 12,000 units of product W32 in inventory, included at cost of $6 per unit.
During April and May 20X7 units of W32 were being sold at a price of $5.40 each, with sales staff receiving a
15% commission on the sales price of the product.
At what amount should inventory of product W32 be recognised in the financial statements of Tentacle as at
31 March 20X7?
bpp answer says = 55080
which i know how the calculated
5.40 – (15% of 5.4) = $4.59 NRV which is lower than cost of 6 $
so inventory valuation will be like = 4.59 x 12000 = 55080
but the question says they were sold it on april n may after reporting date…….so at reporting date of 31st march we don’t have any info about NRV….then why will we value it at NRV….isn’t we should value it on cost 6 x 12000 = 72000.March 24, 2019 at 8:24 pm #510310P2-D2Keymaster
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The sale of inventory is an adjusting event after the reporting date, so even though it was sold in April it gives evidence of the condition of the inventory at the reporting date. Hence it being valued at the $5.40.
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