Inventory IAS 2

vlambkin1

Hi

Can anyone help with calculating inventory under IAS 2?

I've been working on the practice exams on the AAT website and I cannot work out any of the inventory questions!

E.g in Practice exam 3 Question 1.4

A company has 3 different products in it's inventory:

Product Costs incurred to date Estimated Costs of Completion Expected Selling Price
1 £400 £180 £562
2 £572 £210 £798
3 £615 £173 £762

The answer is £1543 but I have no idea why!

I know that under IAS 2 the inventory is valued at the lower of cost and net realisable value but I just cannot get to the figure of £1543!

Any help would be much appreciated.

Thanks :001_smile:

uknitty

You have to remove the expected costs of completion from the expected selling price then compare the adjusted selling price to the costs incurred to date.

Lower of

400 or (562 - 180)
572 or (798 - 210)
615 or (762 - 173)

Gives you 382 +572 + 589 = 1543

vlambkin1

Thank uknitty!

It finally makes sense now!