FRA stock valuation.please help

meibaker

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

crispy

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

oh, i see. thanks very much for you help. very much appriciated!!
best regards
may