The following inventory information was taken from the records of Kleinfeld Inc.:$\begin{array}{ll}
\text { Historical cost } & \$ 12,000 \
\text { Replacement cost } & \$ 7,000 \
\text { Expected selling price } & \$ 9,000 \
\text { Expected selling cost } & \$ 500 \
\text { Normal profit margin } & 50 \% \text { of price }
\end{array}$
-Under IAS 2, what should the balance sheet report for Inventory?
A)$7,000
B)$8,500
C)$7,600
D)$9,000

Question

Quizplus · Accepted Answer

Under IAS 2, inventory should be measured at the lower of cost and net realizable value (NRV). NRV is calculated as the expected selling price ($9,000) minus the expected selling cost ($500), which equals $8,500. Since $8,500 is lower than the historical cost of $12,000, the inventory should be reported at $8,500.

The Following Inventory Information Was Taken from the Records of Kleinfeld