Quick help on practice exam question!

Hi all,

I am doing FRA unit 5 at the moment and doing the Sarah Glass practice paper.

I am stuck on a trial balance question as follows:

Stock was valued at cost on 30 June 2004 at £30040. This includes £625 which is the cost of a carpet that is dirty and needs cleaning. The cost of cleaning it will be £50, and the carpet can then be sold for £300.

I need to make adjustments in my trial balance, for this, is the answer £300 as this is the net realisable value?

Any help would be greatly appreciated,

Amy

Comments

  • lauram
    lauram Registered Posts: 49 ? ? ?
    wow thats a toughie im not there yet, but will be right behind you soon enough hun.

    when you get this back marked, would you minding holding onto it for, thats my practice exam paper too and may well need the help, like i have with everything so far lol, i feel so hopeless right now.
    just had to post a thread about something im stuck on too.

    good luck with it all xxxxx
  • amyjayne27
    amyjayne27 Registered Posts: 314
    Hi Laura,

    Yeah sure no problem. I think I have finished it now so will be sending it off tommorow, I will let you know.

    I just did the practice computer based assessment, I had all my books/answers etc and still failed! I'm gutted, only have 19 days to try and get it into my thick skull!

    Are you taking the CBA? And when is it booked for?

    Good luck to you too, I am sure you will be fine!

    Amy x
  • sdv
    sdv Registered Posts: 585
    amyjayne27 wrote: »
    Hi all,



    Stock was valued at cost on 30 June 2004 at £30040. This includes £625 which is the cost of a carpet that is dirty and needs cleaning. The cost of cleaning it will be £50, and the carpet can then be sold for £300.


    Amy

    Answer = £30,040 - £625 + £250 (300-50)= £29 665

    this [thread=27061]link[/thread] gives a full explanation.
  • amyjayne27
    amyjayne27 Registered Posts: 314
    Hi SDV,

    Thanks for your reply. I do not understand how that figure has come to be as I thought when doing stock valuation you use either the cost OR the net realisable value, not both? It seems that to get the answer both of these methods have been used?

    Thanks,

    Amy
  • sdv
    sdv Registered Posts: 585
    amyjayne27 wrote: »
    Hi SDV,

    Thanks for your reply. I do not understand how that figure has come to be as I thought when doing stock valuation you use either the cost OR the net realisable value, not both? It seems that to get the answer both of these methods have been used?

    Thanks,

    Amy

    SSAP 9 says that stock should be valued at cost or NRV which ever is lower.

    Although the cost of stock is £625, you can ony realise £250 for it.

    therefore from the stock valuation take away £625 (included in the value of £30,040) and add NRV £250 to arrive at a true stock valuation.
  • amyjayne27
    amyjayne27 Registered Posts: 314
    SDV,

    That makes perfect sense thank you.

    So if the stock you have to value is included in the closing stock figure, you minus this then add whatever the lower figure is?

    Thanks again,

    Amy
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