ICAEW AF · Chapter 9 · Question 3 of 9
At 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 can be sold for £4,500. A sales commission of 5% of the selling price will be payable. At what amount should the item be included in inventory?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £3,625
Explanation
NRV = selling price £4,500 - repair costs £650 - commission (5% x £4,500 = £225) = £3,625. NRV is below cost of £4,200, so the item is measured at £3,625, a write-down of £575.
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