On 1 June 2022, Dubbo Ltd acquires inventories for cash of US$400 000. All of the inventories are still on hand at 30 June 2022 and have a net realisable value at that date of US$420 000. Relevant exchange rates are:
1 June 2022 US$1.00 = A$1.30
30 June 2022 US$1.00 = A$1.20
The journal entry recorded by Dubbo Ltd to remeasure the inventories at 30 June 2022 is:
A) DR Inventories write-down expense A$16 000; CR Inventories A$16 000
B) DR Inventories write-down expense A$42 000; CR Inventories A$42 000
C) DR Inventories A$42 000; CR Gain on revaluation (OCI) A$42 000
D) DR Inventories A$16 000; CR Gain on revaluation (OCI) A$16 000

Question

On 1 June 2022, Dubbo Ltd acquires inventories for cash of US$400 000. All of the inventories are still on hand at 30 June 2022 and have a net realisable value at that date of US$420 000. Relevant exchange rates are:
 1 June 2022     US$1.00 = A$1.30
30 June 2022    US$1.00 = A$1.20
The journal entry recorded by Dubbo Ltd to remeasure the inventories at 30 June 2022 is:
A) DR Inventories write-down expense A$16 000; CR Inventories A$16 000
B) DR Inventories write-down expense A$42 000; CR Inventories A$42 000
C) DR Inventories A$42 000; CR Gain on revaluation (OCI) A$42 000
D) DR Inventories A$16 000; CR Gain on revaluation (OCI) A$16 000

Quizplus · Accepted Answer

The correct answer is A because the net realisable value of the inventories has increased, resulting in a write-down expense.

On 1 June 2022, Dubbo Ltd Acquires Inventories for Cash