CA Foundation · Accounting · Inventories
Gupta Electronics holds 200 units of an item costing ₹500 each. The estimated selling price is ₹560 per unit, and the estimated selling expenses are ₹80 per unit. At what value per unit will the item be included in closing stock?
The item is valued at ₹480 per unit. Net realisable value is the selling price of ₹560 less selling expenses of ₹80, which gives ₹480. This is lower than cost of ₹500, so AS 2 requires the lower figure to be used for closing stock.
- A₹560
- B₹500
- C₹480Correct
- D₹640
Explanation
NRV = estimated selling price less estimated costs necessary to make the sale = 560 - 80 = ₹480. Cost is ₹500. The lower is ₹480, so the item is valued at ₹480 per unit (total ₹96,000). Using ₹500 ignores the selling expenses.
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