hello sir, sorry to bother you again
question: an item of inventory which was purchased for $500 is expected to be sold for $1200, although $250 will need to be spent on it in order to achieve the sale. to replace the same item of inventory will cost $650.
my doubt: what is replacement cost and why it not included in NRV
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replacement cost
5y ago#1From what you have written is seems that they expect to sell it. So why would they consider replacing it?
I got this question on the open tuition mock exam. the explanation said
cost $500
NRV: 1200-250=$950
lower :$500
(replacement cost is not relevant )
5y ago#3As I wrote in my previous reply, they are selling it and so they are not going to replace it.
We value inventory always at the lower of cost and net realisable value. I do explain this rule in my lectures.
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