A company's inventory at cost is $64,000. This includes damaged items that cost $3,200. These items can be sold for $2,100 after repairs costing $400. At what amount should total inventory be stated?

Correct answer: A) $62,500

Explanation

NRV of the damaged items = $2,100 - $400 = $1,700, which is below cost of $3,200, so a write-down of $3,200 - $1,700 = $1,500 is needed. Inventory = $64,000 - $1,500 = $62,500. Ignoring the repair costs gives a write-down of $1,100 and $62,900; removing the items entirely gives $60,800.