ACCA FA2 INVENTORY VALUE

Amit buys machines, which he repairs and then sells. He has the following information about a machine which is being repaired at 30 November.

	$
Cost of machine	32,500
Cost of repair to date	13,000
Cost of further repairs before sales	3,000
Expected sale proceeds	50,000

What is the inventory value of the machine in Amit's statement of Financial Position at 30 November ?

ACCA FA2 inventory value

Suggested Solution.

	$
Cost of machine	32,500
Cost of repair to date	13,000
Cost of Inventory based on cost	45,500

	$
Sales Proceed	50,000
Cost of further repairs before sales	3,000
Net realisable value	47,000

The answer is $45,500 based on the lower of cost or net realisable value.