Inventory

Question 1

How do you value inventory (IAS2)

Answer 1

At the lower of cost and net realisable value (nrv)

Question 2

Define cost (in terms of valuing inventory)

Answer 2

How much you paid for each item (including costs needed to get it ready for sale)

Question 3

Define NRV (in terms of valuing inventory)

Answer 3

the amount you expect to sell it for minus any selling costs (advertising, repairs, commissions etc)

Question 4

Why is inventory valued by IAS2

Answer 4

Ensures inventory is not overstated and profits aren’t shown higher than they really are