Question
S, an entity had 500 units of product X at 30 June 2015.
The product had been purchased at a cost of $18 per unit and normally sells for $24 per unit. Recently, product X started to deteriorate but can still be sold for $24 per unit, provided some rectification work is undertaken at a cost of $3 per unit. What is the value of closing inventory at 30 June 2015.Solution
As per AS – 2, the inventories are to valued at cost or NRV, whichever is lower. Here, cost = 18 and NRV = 24-3=21. So, lower among the two is cost, i.e. 18*500 units.
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