ACCA FA · Chapter 11 · Question 7 of 12
At its year end, a company held inventory that had cost $18,000. After the year end, but before the financial statements were authorised, the inventory was sold for $14,500, with selling costs of $500. What write-down, if any, is required in the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A write-down of $4,000
Explanation
The sale after the year end provides evidence of the net realisable value of inventory held at the reporting date, so it is an adjusting event. NRV = $14,500 - $500 = $14,000. Write-down = $18,000 - $14,000 = $4,000. Ignoring selling costs gives $3,500.
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