PRC-1 · Chapter 8 · Question 62 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 a 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 is stated at the lower of cost (12,000) and NRV (14,000). Since cost is already lower, no write-down is necessary.
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