9.5: A stationery supplies business has 500 large ring binders in stock at the end of it financial year on 30 June 2005. The details are
cost price £2.20 per ring binder
selling price £4.00 each
As the ring binders have not sold well, the owner of the business has decided to overprint them with pictures in order to make them attractive to students starting courses at the local college in September. The cost of the over printingwill be £1 per binder and the "special offer" price to students will then be £3 per binder.
What is the stock valuation for 500 binders in stock on 30 June 2005?
welshwizard wrote: »
This situation is subject to IAS 2 which state that 'Inventories shall be valued at the lower of cost or net realisable value'.
The goods have cost £2.20
Overprinting cost £1.00
They will be sold at £3.00
Therefore, the goods will be sold at selling price - conversion cost
At 30 June 2005, inventory would be valued thus:
£2.0 x 500 units = £1,000.00
Hope it helps.
CHeck out Steve Collings clearly explained document at: http://www.accountancystudents.co.uk/images/uploads/Extract%20of%20A%20Summary%20of%20IFRS%20and%20IAS%20publication.pdf