Toey Ltd has provided the following information about the total production cost and estimates of realisable value of three lines of shoes they produce within the same class of inventory $\begin{array}{|c|c|r|c|c|}
\hline \text { Item } & \begin{array}{c}
\text { Production cost } \
\$ 000
\end{array} & \begin{array}{c}
\text { Sales proceeds } \
\$ 000
\end{array} & \begin{array}{c}
\text { Packaging costs } \
\$ 000
\end{array} & \begin{array}{c}
\text { Freight outwards } \
\$ 000
\end{array} \
\hline \text { Sling back } & 13 & 15 & 3 & 2\\hline \text { Court } & 10 & 16 & 3 & 1 \
\hline \text { Stiletto } & 17 & 19 & 4 & 3 \
\hline
\end{array}$ Packaging and freight are necessary in order to be able to sell the shoes.What is the value of the inventory in accordance with IAS 2?
A)$34 000
B)$40 000
C)$32 000
D)$24 000

Question

Quizplus · Accepted Answer

According to IAS 2, inventory should be valued at the lower of cost and net realizable value (NRV). NRV is calculated as sales proceeds minus packaging and freight costs. For Sling back: NRV = 15 - 3 - 2 = 10; for Court: NRV = 16 - 3 - 1 = 12; for Stiletto: NRV = 19 - 4 - 3 = 12. The inventory value is the sum of the lower of cost or NRV for each item: 10 (Sling back) + 10 (Court) + 12 (Stiletto) = $32,000.

Toey Ltd Has Provided the Following Information About the Total