Question

Practice Inventory Exercise The inventory of a motor vehicle dealer presents the following information at the end of the accounting period Cost Estimated costs before Expected sales price of the sale € € € Vehicle 1 14,200 1,250 18,000 Vehicle 2 17,500 1,000 20,000 Vehicle 3 11,900 1,240 14,000 Vehicle 4 13,000 2,760 15,000 Dealer sellers are paid a commission when they sell the vehicle. The commission determines how 5% of the sale price. Required: Determine the value at which each vehicle will be presented in the financial statements of the dealer according to IAS 2

Answer 1

According ro IAS 2 ,  inventory should be valued at the lower of Cost & Net Realisable value

cost is given in the question

net realisable value (NRV) =estimated selling price - estimated cost before the sale - commision on sale

commision is 5 % on the estimated selling price

vehichle 1, vehichle 2 and vehichle 3 should be valued at cost and  vehichle 4 should be valued at NRV in the financial statements.workings are given below

B с D E F G 1 3 expected sales price estimated costs before the sale commision NRV 4 vehichle 1 18000 1250 900 15850 5 vehichle 2 20000 1000 1000 18000 6 vehichle 3 14000 1240 700 12060 7 vehichle 4 15000 2760 750 11490 8 9 cost NRV lower value 10 vehichle 1 14200 15850 14200 11 vehichle 2 17500 18000 17500 12 vehichle 3 11900 12060 11900 13 vehichle 4 13000 11490 11490 14 15 16