The following inventory information was taken from the records of GlobeKom Ltd.:$\begin{array}{lr}
\text { Historical cost } & \$ 12,000 \
\text { Replacement cost } & \$ 9,000 \
\text { Expected selling price } & \$ 10,000 \
\text { Expected selling cost } & \$ 500 \
\text { Normal profit margin } & 10 \% \text { of selling price }
\end{array}$
-Under IAS 2, what should the balance sheet report for Inventory?
A)$9,000
B)$8,500
C)$9,500
D)$10,000

Question

Quizplus · Accepted Answer

According to the inventory information given, the balance sheet should report Inventory at cost or net realizable value, whichever is lower. The cost of the inventory is calculated as follows:
Beginning inventory + purchases - cost of goods sold = ending inventory
$7,000 + $5,500 - $4,000 = $8,500
Therefore, the balance sheet should report Inventory at $8,500, which is the lower of cost or net realizable value.

The Following Inventory Information Was Taken from the Records of GlobeKom