Kaplan FNST help

xlickle_cutiex

Hiya just wondering if anyone can help me please!!

I'm studying FNST at Kaplan and going through their class notes as we were told to complete a question at home which is Atok limited page 37, incase anyone is also studying with Kaplan. But i am completly stuck please help!

I can't work out the closing inventory and i am given this to help:

Inventory at 30 june 20x9 ammounted to £1560,000 at cost. items which has cost £80,000 and which would normall sell for £120,000 were found to have deteriorated. Redemial work costing £20,000 would be needed to enable the items to be sold for £90,000.

Im not looking for anyone to give me the answer just give some advice on how to work it out.

Thanks everyone

Henry

I think we may follow the principle that "stocks should be valued at lower of cost and net realisable value".

Here we have stock costing £80,000 plus further £20,000 (£100,000). Net realisable value however is £90,000. This is the figure that will be used to record the inventory value as it is the lower figure.

So you need to adjust the innitial figure of £1,560,000 by £80,000 then add back the £90,000. New inventory figure £1,570,000.

I think so anyway, so hope this helps. Not doing FNST and certainly not with Kaplan.

Nia

I agree with Henry, that valuation rule of lower of cost and NRV should be followed, but in terms of the figures I think it should be....

current valuation £1,560,000 (includes £80,000 - lower of £80,000 & £120,000)

£80,000 needs to be adjusted to £70,000 (£90,000 - £20,000)

so new valuation = £1,560,000 - £80,000 + £70,000 = £1,550,000

I'm not studying with Kaplan either and haven't started Level 4 yet, so I may be wrong.......

xlickle_cutiex

Thank you! Hopefully it's right will find out tomorrow. Having so much trouble with it! Do you knwo what it ment by a loan note? I've tired googling it but cant seem to get to grips with that either

Thankkkks x

Henry

Please do report back and let us know which version of these answers are correct (I believe mine is but then...). I cannot say I have ever heard the term "loan note" before but here is a link that explains it: http://www.investopedia.com/terms/l/loan-note.asp#axzz1Q15QTwV8

xlickle_cutiex

hiya

just to let you know henry you were right the answer was as follows :

closing inventories 1560000
items already included at cost (80000)
items to be included at nrv 70000
1550000

Thanks for your help

Nia

think it was me that gave you that answer

xlickle_cutiex

I'm sorry Nia it was you sorry about that lol

Thanks again

Nia

lol, it's ok. Glad to be of help