- This topic has 3 replies, 2 voices, and was last updated 6 years ago by
.
- Posts
Hi Mr John . I’m preparing SOPL
The information that is given to calculate closing inventory is
” Inventories at the close of business on 31 Dec 2009 were valued at cost of $19.871 . Included in this amount was an inventory line at cost of $4000 that , due to change in legislation , is now illegal . Clerc could rectify the items at a cost of $2500 and plans to do so . The items usually retail to customer at $6000 ”So my workings is : 19.871- 4000-( 6000-2500) = 12.371
Working in book is :19.871 -( 4000-3500) = 19.371
Can you pls explain the working in the book ? Many ThanksThe illegal inventory should be valued at the lower of cost ($4,000) or net realisable value ($6,000 – $2,500 = $3,500).
Therefore it should be included at $3,500 instead of the amount it is currently included at of $4,000.
So subtract $4,000 from the current total, and add $3,500 instead, which gives a correct total of $19,371.
Have you watched my free lectures on the valuation of inventory? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
I have watched your lectures . But I’ll rewatch again to be sure that I don’t miss any important point …
Thanks for your explanation .
- You must be logged in to reply to this topic.