PRC-1 · Chapter 8 · Question 10 of 100
Closing inventory includes an item valued at cost of Rs. 12,000. The net realizable value of this item is Rs.14,000. The entity uses perpetual inventory system. What journal entry is required to correct the above error?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) No journal entry is required
Explanation
Inventory must be measured at the lower of cost and NRV. Since the cost (Rs. 12,000) is already lower than the NRV (Rs. 14,000), the current valuation is correct and no adjustment is needed.
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