Silvia is a market trader who deals in shoes.At 31 October 20X4 her closing inventory is valued at a cost of £13 750.Closing inventory includes a batch of shoes which cost Silvia £800 earlier in the year.This particular range of shoes has not sold well, and Silvia estimates that she will need to discount it heavily in order to shift it.She estimates that she can probably sell the batch of inventory for £300. What is the value of Silvia's closing inventory at 31 October 20X4, applying the rules of inventory valuation?
A)£14 550
B)£13 250
C)£13 750
D)£14 250

Question

Quizplus · Accepted Answer

The correct value of Silvia's closing inventory, applying the rules of inventory valuation, is £13,250. This is because inventory should be valued at the lower of cost and net realizable value. The batch of shoes that cost £800 but can only be sold for £300 should be written down to £300, reducing the inventory value by £500 (£800 - £300) from the original £13,750 to £13,250.

Silvia Is a Market Trader Who Deals in Shoes