PRC-1 · Chapter 7 · Question 7 of 100
An inventory item was purchased for Rs. 7,000 per unit. Its estimated sales price is Rs. 10,000, but a selling cost of Rs. 3,200 will be incurred to make the sale. The current replacement cost is Rs. 7,500. At what value should the inventory item be recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Rs. 6,800
Explanation
Inventory must be measured at the lower of Cost and NRV. Cost = Rs. 7,000. NRV = Selling Price (10,000) - Selling Cost (3,200) = Rs. 6,800. Therefore, it is valued at Rs. 6,800. Replacement cost is irrelevant under IAS 2.
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