Question

Sullivan Corporation has determined its year-end inventory on a FIFO basis to be $524,000. Information pertaining to that inventory is as follows: Selling price $ 532,000 Costs to sell 36,000 Replacement cost 458,000 What should be the reported value of Sullivan's inventory if the company prepares its financial statements according to International Financial Reporting Standards (IFRS)

Answer 1

Reported value of inventory = $ 524000

Step-by-step explanation:

According to International Accounting Standards (IAS 2) , Inventory should be measured at the lower of cost and net realizable value .

So using the IFRS the cost to be reported as the value of inventory should be the lower of

1. Cost $ 524,000
2. Realizable value $ 532,000

Reported value of inventory = $ 524,000 which is the lower.

Kindly note that the standard specifies the costs to be be included in determining the net realizable which does not include selling cost. Hence selling cost is not part of them. Rather , it should be expensed in the income statement under the appropriate cost category