2. A company has inventory on hand at year-end (31 December 2021) that it expects to be able to sell in the ordinary course of business for Rs. 10,000. The cost of these inventories is Rs: 7,000. In order to sell this inventory, the company expects to incur selling costs of Rs. 2,000 and expects to incur further costs of Rs. 3,000 to put this inventory into a saleable condition. Required: a. Calculate the net realizable value b. Calculate any possible write-down and c. Journalize any write-down necessary. d. Show where the write-down would be included and disclosed in the financial statements.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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2. A company has inventory on hand at year-end (31 December 2021) that it
expects to be able to sell in the ordinary course of business for Rs. 10,000.
The cost of these inventories is Rs: 7,000. In order to sell this inventory, the
company expects to incur selling costs of Rs. 2,000 and expects to incur
further costs of Rs. 3,000 to put this inventory into a saleable condition.
Required:
a. Calculate the net realizable value
b. Calculate any possible write-down and
c. Journalize any write-down necessary.
d. Show where the write-down would be included and disclosed in the
financial statements.
Transcribed Image Text:2. A company has inventory on hand at year-end (31 December 2021) that it expects to be able to sell in the ordinary course of business for Rs. 10,000. The cost of these inventories is Rs: 7,000. In order to sell this inventory, the company expects to incur selling costs of Rs. 2,000 and expects to incur further costs of Rs. 3,000 to put this inventory into a saleable condition. Required: a. Calculate the net realizable value b. Calculate any possible write-down and c. Journalize any write-down necessary. d. Show where the write-down would be included and disclosed in the financial statements.
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