Skip to content

ACCA Applied Knowledge · Financial Accounting · Events after the reporting period

Orion Co's year-end is 30 June 20X6. Inventory with a cost of $90,000 was in the warehouse at that date. In July 20X6, before the financial statements were authorised, the inventory was sold for $70,000 with selling costs of $5,000, because it had been damaged in May 20X6. By what amount should inventory be written down at 30 June 20X6?

Inventory should be written down by $25,000. The post-year-end sale is an adjusting event, giving net realisable value of $70,000 less $5,000 selling costs, which is $65,000. Cost of $90,000 exceeds this, so the write-down is $25,000.

  1. A$20,000
  2. B$25,000Correct
  3. C$15,000
  4. D$5,000

Explanation

The sale provides evidence of net realisable value at the reporting date as the damage occurred before it. NRV = 70,000 - 5,000 = 65,000. Inventory is held at the lower of cost and NRV, so the write-down is 90,000 - 65,000 = 25,000. $20,000 ignores selling costs.

Did you get it right without looking?

One question tells you little. A timed set on Events after the reporting period shows your real accuracy, how long you take and where you lose marks.

Practise Events after the reporting periodFree diagnostic mock

More Events after the reporting period questions