Question

A Co. showed the following values for its inventory as of the end of its fiscal year: Historical cost $100,000 Current replacement cost 70,000 Net realizable value [NRV] 90,000 NRV less a normal profit margin 80,000 Fair value 96,000 What amount should the company report for inventory on its balance sheet

Answer 1

The value of the inventory is $90,000,NRV

Step-by-step explanation:

According to International Financial Reporting Standard,specifically IAS 2, inventories should be valued at the lower of cost or net realizable value.

In this scenario net realizable of $90,000 is lower than cost of $100,000,hence the inventory is recorded in the balance sheet at $90,000.

The necessary entries to bring inventory value to $90,000 is by crediting inventory $10,000 with a corresponding debit entry posted to statement of profit or loss(income statement)

Answer 2

$90,000

Step-by-step explanation:

The reason is that the International Accounting standard IAS 3 Inventories says that the asset must be reported at lower of:

Cost &

Net realizable value

Here the cost is $100,000 and NRV is $90,000, which means that the inventory must be reported at $90,000 which is the lower value.