FRA stock valuation.please help

Q: a suplies has 500 large ring binders at the end of fiancial year, cost price £2.20 per ring, selling £4.00 each, as the ring haven't sold well, he decided to overprint them which cost £1.00 per binder and selling for £3.00, what's the stock valuation for 500 rings? the answer is 1,000. please anyone who can explain why? many thanks
may

Comments

  • crispy
    crispy Registered Posts: 465 Dedicated contributor ? ? ?
    Hello,

    Stock should be valued at the lower of cost and Net Realisable Value so therefore :

    Cost = £ 2.20
    NRV = £ 3.00 - £ 1.00 = £ 2.00

    As NRV is lower than cost the stock is valued as 500 x £ 2.00 = £ 1,000.00

    Remember that Net Realisable Value means selling cost less any costs incurred to bring the item to their saleable status.
  • meibaker
    meibaker Registered Posts: 481
    oh, i see. thanks very much for you help. very much appriciated!!
    best regards
    may
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