Question

On the Viewer brand with a product inventory of € 50 million, as per the draft trial balance, the following information per reporting date has not been considered yet: Expected sales value of inventory, when sold in 2023 € 100 million a. Estimated selling cost in case of sale = € 10 million b. Lost stock in % of total, from a physical count per December 31, 2022 = 2%. Determine the balance of product inventory to be included in financial statements of the company at the end of the year. Explain your choices

Answer 1

The adjusted inventory balance for financial statements at the end of the year is €49 million, after accounting for a 2% stock loss from the draft trial balance inventory of €50 million.

Step-by-step explanation:

The student is asking to determine the balance of product inventory to be reflected in the financial statements at year-end after considering additional information. To calculate the adjusted balance, we need to account for lost stock and any estimated selling costs.

• Start with the draft trial balance inventory figure: €50 million.
• Calculate the inventory loss: 2% of €50 million = €1 million.
• Subtract the lost stock from the draft trial balance figure: €50 million - €1 million = €49 million.
• The estimated selling costs do not alter the inventory balance as such costs are typically accounted for separately.

Therefore, the balance of product inventory to be included in the financial statements is €49 million.