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AP1 Closing inventory

lifeisstrangelifeisstrange Feels At HomePosts: 27Registered
in AAT Level 3 (Level 6 in Scotland)
Hi everybody,

I don't know how to value the closing stock:

"No entries have been made for closing stock for the year-end 31 December 2000. Closing stock has been valued at cost at £17500. Included in this figure are some items costing £1000 that will be sold for £1500."

Could you help me please?
Thanks
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Comments

  • uknittyuknitty Experienced Mentor Posts: 591Registered
    Inventory is always valued at the lower of cot cost or net realisable value. In the example you give above the cost is lower than the net realisable value so it has already been treated correctly, does the question give any further information ?
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  • lifeisstrangelifeisstrange Feels At Home Posts: 27Registered
    Thank you for your reply Uknitty. No the question doesn't give further information.

    So if I have understood correctly, the closing stock will be valued at £17500.

    Is that correct?
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  • uknittyuknitty Experienced Mentor Posts: 591Registered
    From the information that you have given that is what I would say. (Cost price is lower than NRV so closing inventory has already been valued correctly)

    If the question said

    "Closing inventory has been valued at £20,000 included in this figure is stock that cost £5000 but has a NRV of £4000 " You would want to use the NRV figure in your total as this is the lower figure.

    You would need to adjust the Inventory by taking out the cost price and adding in the NRV.

    20,000 - 5000 +4000 = 19,000

    So you can see here that we have reduced the overall total.
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  • Diddy MauDiddy Mau Well-Known Posts: 238Registered
    lifeisstrange wrote: »
    Hi everybody,

    I don't know how to value the closing stock:

    "No entries have been made for closing stock for the year-end 31 December 2000. Closing stock has been valued at cost at £17500. Included in this figure are some items costing £1000 that will be sold for £1500."

    Could you help me please?
    Thanks
    I have read this, and get a different answer.
    I agree with Uknitty's explaination, but Closing stock is £17,500 including £1000 to be sold at £1500.
    So, I would say £17,500-£1,500+£1,000=£17,000.
    As the stock is to be sold at £1,500, its not sold yet. So its value is £1,000 unless stated otherwise.
    Inventory is valued at the lower.

    Hope this helps. Eventhough I get different answer, All depends on how you read the question
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  • uknittyuknitty Experienced Mentor Posts: 591Registered
    Diddy, I read it that the closing inventory was already valued at cost.

    The £500 profit you refer to removing has not already been included in the inventory valuation as the total figure is valued at cost already ?
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  • Diddy MauDiddy Mau Well-Known Posts: 238Registered
    Uknitty,
    Yeah I think your right. I've just read it again.

    Lifeisstrange, ignore my previous
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