ACCA FA · Chapter 5 · Question 4 of 10
A 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 Product Z: cost $1,800, NRV $1,750 At what amount should inventory be shown in the statement of financial position?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $9,050
Explanation
The lower of cost and NRV must be applied to each item or group of similar items separately: X $2,400 + Y $4,900 + Z $1,750 = $9,050. Comparing totals (cost $9,800 v NRV $9,750) and taking $9,750 is not permitted, because it lets gains on one product offset losses on another.
More Inventory (IAS 2) MCQs
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