A business has 100 units in stock at Rs. 10 each and buys 100 more units at Rs. 14 each. It then sells 120 units. Under a perpetual moving average method, what is the value of the closing inventory?
Correct answer: C. Rs. 960
- A. Rs. 800
- B. Rs. 880
- C. Rs. 960
- D. Rs. 1,120
Explanation
After the purchase, the average cost is Rs. 12 per unit, calculated from Rs. 2,400 divided by 200 units. The 80 remaining units therefore have a value of Rs. 960.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
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More Inventory Valuation questions
Which item is deducted from the purchase price when determining the cost of inventory under IAS 2?
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When inventory is bought on deferred settlement terms containing a financing element, the difference between the cash price and the total payment is generally treated as:
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