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sophie_612sophie_612 LondonRegistered Posts: 107

Please can someone explain where they got the closing inventories figure from please?



  • hal978hal978 LondonMAAT, AAT Licensed Accountant Posts: 187
    Because closing inventories had to be written down by £258,000 (the further information says some inventories that cost £358,000 can only be sold for £100,000).

    Inventories have to be valued at the lower of cost and net realisable value.
  • Clintm15Clintm15 Well-Known FarehamRegistered Posts: 247
    Included within inventory are some items at cost £358,000 that could only be sold for £100,000. Because inventory has to be sold at the lower of cost or net realisable value (what you can sell it for) we have to calculate a write-down.

    The write down means taking the particular inventory item down from £358,000 to £100,000, this means taking the overall inventory down by £258,000 (£358,000 - £100,000).

    So original closing inventory £3,142,000 - £258,000 = £2,884,000.
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  • Duchess1Duchess1 MAAT Posts: 74
    Sophie, as above!
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