ICAEW AF · Chapter 9 · Question 4 of 9
A business holds three product lines at its year end: Product X: cost £2,400, net realisable value £3,100 Product Y: cost £1,850, net realisable value £1,500 Product Z: cost £3,700, net realisable value £4,100 At what total amount should inventory be stated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) £7,600
Explanation
IAS 2 requires the lower of cost and NRV to be applied item by item (or to groups of similar items), not to the total. X: £2,400, Y: £1,500 (NRV below cost), Z: £3,700. Total = £7,600. Comparing totals (£7,950 cost against £8,700 NRV) would hide the loss on product Y.
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