ACCA FA · Chapter 5 · Question 1 of 10
According to IAS 2 Inventories, how should inventories be measured?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) At the lower of cost and net realisable value
Explanation
IAS 2 requires inventories to be measured at the lower of cost and net realisable value (NRV). NRV is the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale. This prevents inventory from being carried at more than it is expected to realise.
More Inventory (IAS 2) MCQs
- Q3A business holds 40 units of an item that cost $850 each. The items can be sold for $900 each, but each unit first needs modifications…
- Q4A business has three product lines in inventory at its year end: Product X: cost $2,400, NRV $3,100 Product Y: cost $5,600, NRV $4,900…
- Q5A business had the following inventory movements in March: 1 March: opening inventory 100 units at $5.00 4 March: purchased 200 units at…
- Q6A business uses the continuous weighted average cost (AVCO) method. Its inventory movements in March were: 1 March: opening inventory 100…
- Q7A company's year end is 31 December. Its inventory count took place on 7 January and valued inventory at cost of $48,300. Between 1…