FSLC Test 2

sophie_612
sophie_612 Registered Posts: 136 Dedicated contributor 🦉
Hi,

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

Thanks
Sophie




Comments

  • hal978
    hal978 Registered Posts: 197 Dedicated contributor 🦉
    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.
  • Clintm15
    Clintm15 Registered Posts: 248 Dedicated contributor 🦉
    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.
    AAT
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  • Duchess1
    Duchess1 Registered Posts: 85
    Sophie, as above!
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