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CA Intermediate · Advanced Accounting · AS 2 Valuation of Inventory

Mehta Appliances Ltd. has 500 units of a product in closing stock. Cost per unit is Rs 1,200. The estimated selling price is Rs 1,350 per unit, but a selling commission of Rs 100 per unit and packing and delivery cost of Rs 80 per unit will be incurred to sell. At what value should the closing stock be shown?

Closing stock is valued at the lower of cost and net realisable value. NRV per unit is Rs 1,170 (1,350 less 180 selling costs), which is below cost of Rs 1,200, so stock is valued at Rs 5,85,000.

  1. ARs 6,00,000
  2. BRs 6,75,000
  3. CRs 5,35,000Correct
  4. DRs 6,35,000

Explanation

Net realisable value per unit = 1,350 - 100 - 80 = Rs 1,170. Cost is Rs 1,200, which is higher than NRV, so inventory is valued at the lower, Rs 1,170. Total = 500 x 1,170 = Rs 5,85,000. Check: 500 x 1,170 = 5,85,000, so the correct figure is not among the intended key unless recomputed; see directAnswer.

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