CA Foundation · Accounting · Inventories
Kapoor Traders has three items of stock at year end. Item A: cost ₹40,000, NRV ₹45,000. Item B: cost ₹60,000, NRV ₹52,000. Item C: cost ₹30,000, NRV ₹28,000. Applying AS 2 item by item, the closing stock value is:
Closing stock is ₹1,20,000. Each item is valued separately at the lower of cost and NRV: ₹40,000 for A, ₹52,000 for B and ₹28,000 for C. Adding these gives ₹1,20,000, rather than total cost of ₹1,30,000.
- A₹1,30,000
- B₹1,25,000
- C₹1,20,000Correct
- D₹1,37,000
Explanation
Take the lower of cost and NRV for each item: A = 40,000; B = 52,000; C = 28,000. Total = ₹1,20,000. The figure of ₹1,25,000 is the total NRV, which wrongly takes NRV for item A as well, and ₹1,30,000 is the total cost.
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