Question

A company manufactures and distributes replacement parts for various industries. As of December 31, year 1, the following amounts pertain to the company's inventory: Item Cost Net replacement cost Sale price Cost to sell or dispose Normal profit margin Blades $41,000 $ 38,000 $ 50,000 $ 2,000 $15,000 Towers 52,000 40,000 54,000 4,000 14,000 Generators 20,000 24,000 30,000 2,000 6,000 Gearboxes 80,000 105,000 120,000 12,000 8,000 What is the total carrying value of the company's inventory as of December 31, year 1, under IFRS?

Answer 1

Total Inventory = 191,000

Step-by-step explanation:

You will have to compare the cost column with the net realisable value.

So you need to do Sale price - Cost to sell or dispose to get the NRV of each one.

Then we compare with the cost, and pick the lowest.

`\left[\begin{array}{ccCCc}$Item&$Cost&$sale price&$cost to sell or dispose&$NVR\\Blades&41000&50000&2000&48000\\Towers&52000&54000&4000&50000\\Generators&20000&30000&2000&28000\\Gearboxes&80000&120000&12000&108000\\\end{array}\right] \\`

So we have the following:

Blades: 41,000

Towers: 50,000

Generators: 20,000

Gearboxes: 80,000

Total Inventory = 191,000