ACCA Applied Knowledge · Financial Accounting · Inventories
Trish Ltd values inventory at the lower of cost and net realisable value. At the year end, 500 units of Product X are held. Cost is $12 per unit. The units can be sold for $20 each, but only after rework costing $5 per unit, and selling costs will be $2 per unit. What is the total value of Product X in the statement of financial position?
Net realisable value per unit is selling price $20 less rework $5 and selling costs $2, giving $13. This is higher than cost of $12, so inventory stays at cost. The total value is 500 units multiplied by $12, which equals $6,000.
- A$3,000
- B$6,000
- C$5,500
- D$4,500Correct
Explanation
NRV per unit = 20 - 5 - 2 = $13 and cost is $12. The lower is $12... recompute: 13 exceeds 12, so cost applies: 500 x 12 = $6,000. Wait, the correct option must be $6,000.
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