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Hi Tutor,
May I ask if it is okay for some samples of valuation testing for inventory and NCA? I am still confused.
Thank you in advance.
Inventory should be at the lower of cost and NRV.
Cost: for example, trace back to supplier invoices
NRV: for example look at current selling price lists and test that inventory is still seling ok and is undamaged.
NCA is usually at cost less depreciation so look at invoices or historical records and recalulate depreciation. If the asset is not being used any more it should be written doen to a scrap value, often Nil.
So this means that selling price must be higher than cost. If this is not the case, inventory might have been overstated?
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