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Hi , I hope you are well 🙂 i am struggling with the question below , would you be able to assist me please ?
At 30 September 2012 , the closing inventory of a company was $386400.
The following items was include in this cost :
1) 1000 items which cost $18 each. these items were all sold in Oct 2012 for $15n each , with selling expense of $800.
2) 5 items which had been in inventory since 1978 when they were purchases for $100 each , were sold in Oct 2012 for $1000 each net of selling expenses.What figure for inventory should appear in the company’s statement of financial position at 30 September 2012 ?
Thank you in advance and i hope to hear from you soon 🙂
Inventory should be valued at the lower of cost and net realisable value.
For (1) the cost of the items is 18,000. The net realisable value is 15000 – 800 = 14200 which is lower than the cost.Because the inventory is current valued at cost, we therefore need to subtract the difference of (18000 – 14,200) from the total.
For (2) there is no problem. The cost is lower than the net realisable value and therefore no adjustment is necessary.
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