ICAEW AF · Chapter 9 · Question 1 of 9
Under IAS 2 Inventories, at what amount should inventories be measured?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 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 in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. This ensures that inventory is not carried at more than it is expected to realise.
More Inventory MCQs
- Q3At the year end, a business holds an item of inventory that cost £4,200. The item is damaged and will need repairs costing £650 before it…
- Q4A 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…
- Q5A business had opening inventory of 200 units at £5 each. During the period it bought 300 units at £6 each and then 400 units at £6.50…
- Q6A business uses the weighted average cost method, recalculating the average after each purchase. Its inventory movements for the month…
- Q7A business overstated its closing inventory at the end of year 1. The error was not discovered and the year 2 closing inventory was…