Question

7.15. Example 15- Hurricane Hurricane, an entity, has 1,500 units of product Y at 30 June 20X8. The product had been purchased at a cost of $30 per unit and normally sells for $40 per unit. Recently, product Y started to deteriorate and can now be sold for only $38 per unit, provided that some rectification work is undertaken at a cost of $10 per unit. What was the value of inventory at 30 June 20X8 ?

Answer 1

Answer: Inventory value as of June 30 = $42000

Explanation:

Inventory is valued at the lesser of its cost or its net realisable worth.

The predicted Net Realisable Value is the the selling price less the selling costs.

Product selling price 38

Less: The selling price is $10

Per unit Net Realisable Value 28

Lower of Cost or Net Realisable Value is $28

Net Realizable Value per unit 1500 X Net Realisable Value per unit

28 Inventory value as of June 30: $42000