Under IAS 2, inventories are generally measured at which amount?
Correct answer: A. Cost or net realisable value, whichever is lower
- A. Cost or net realisable value, whichever is lower
- B. Cost or market value, whichever is higher
- C. Selling price or cost, whichever is higher
- D. Net realisable value or profit, whichever is lower
Explanation
IAS 2 applies the prudence principle by carrying inventory at the lower of cost and net realisable value. Net realisable value is estimated selling price less completion and selling costs, not simply the selling price.
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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 inventory valuation method assumes that the earliest goods purchased are sold first?
Which inventory cost flow method is not permitted under IAS 2?
During a period of rising prices, which method generally reports the highest closing inventory value?
A business has 100 units costing Rs. 10 each and 200 units costing Rs. 13 each. Under the weighted average cost method, the cost per unit is: