Valuation help
Leanne312
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Hey everyone, could anyone help me with the following question?
I've got the first part as minus £500 off the inventory, the second i am not sure about. The third i have as plus £350 to the inventory. I don't get any of the answers provided below, so probably got this wrong.
"At the year-end, a business valued its inventory at cost of £106,800.00 However, since the valuation was carried out the following matters have come to light, this means that the original inventory valuation may need to be amended:
One item of inventory is damaged. The item cost £1,000.00, repairs costing £250.00 are necessary to get the item into a saleable condition. The item will then be sold in a 'clearance' sale for £750.00.
One item of inventory which cost the business £500.00 is now obsolete and is to be scrapped.
There are 10 items of inventory, the packaging on which has become damaged. The items cost the business £60.00 each, but they now have to be repackaged; the repackaging will cost £5.00 per item. The items will then be sold at £100.00 each.
Based on the information provided above, indicate which one of the following figures represents the amended inventory valuation:
The answers are £105,750, £107,050, £105,800, £105,300. "
Thank you in advance.
I've got the first part as minus £500 off the inventory, the second i am not sure about. The third i have as plus £350 to the inventory. I don't get any of the answers provided below, so probably got this wrong.
"At the year-end, a business valued its inventory at cost of £106,800.00 However, since the valuation was carried out the following matters have come to light, this means that the original inventory valuation may need to be amended:
One item of inventory is damaged. The item cost £1,000.00, repairs costing £250.00 are necessary to get the item into a saleable condition. The item will then be sold in a 'clearance' sale for £750.00.
One item of inventory which cost the business £500.00 is now obsolete and is to be scrapped.
There are 10 items of inventory, the packaging on which has become damaged. The items cost the business £60.00 each, but they now have to be repackaged; the repackaging will cost £5.00 per item. The items will then be sold at £100.00 each.
Based on the information provided above, indicate which one of the following figures represents the amended inventory valuation:
The answers are £105,750, £107,050, £105,800, £105,300. "
Thank you in advance.
0
Comments
-
I haven't done a question like this for years, should be fun.
I have the damaged inventory as -
Original cost = £1000
Repairs = £250
Total cost = £1250
Net realisable value = £750
Write-off = £1250-£750 = £500
Obsolete inventory -
Write-off to liquidation value = £500
Repackaged inventory -
Original cost = 10 x £60 = £600
Repackaging costs = 10 x £5 = £50
Total cost = £650
Net realisable value = 10 x £100 = £1000
Cost lower than NRV so only an increase of £50 necessary.
Total overall net change £106,800 - £500 -£500 +£50
New adjusted inventory = £105,850
I don't have one of the answers either.
AAT
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What's the basis for ignoring the damaged packaging?Mickdundee said:£105,800.00
Is it included in the NRV?
As in... Net realisable value = £1,000 - £50 = £950AAT
Level 2 - 2011
Level 3 - 2012
Level 4 - 2013
ACCA
F4 - Corporate Law - Dec 2015 (passed)
F5 - Performance Management - Dec 2014 (passed)
F6 - Taxation - Dec 2013 (passed)
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F9 - Financial Management - Jun 2015 (passed)0 -
The packaging is part of the inventory surely? The original packaging price would have been included in the original inventory price.Mickdundee said:The packaging does not affect inventory.
It would impact the COS, however.
So unless the packaging is part of the selling costs in the NRV calculation (NRV = market price - selling costs), or delivery packaging that forms part of carriage costs, it doesn't make too much sense.AAT
Level 2 - 2011
Level 3 - 2012
Level 4 - 2013
ACCA
F4 - Corporate Law - Dec 2015 (passed)
F5 - Performance Management - Dec 2014 (passed)
F6 - Taxation - Dec 2013 (passed)
F7 - Financial Reporting - Jun 2014 (passed)
F8 - Audit & Assurance - Dec 2015 (passed)
F9 - Financial Management - Jun 2015 (passed)0
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