Question

A retailer holds seasonal fashion inventory purchased at

Q: Answer-A retailer holds seasonal fashion inventory purchased at ₹20 lakh. At year-end, expected selling pri...

Inventories are measured at the lower of cost and NRV. Here cost 20 lakh, NRV 25 7 18 lakh. Carrying value 18 lakh since NRV is lower.

₹20 lakh. At year-end, expected selling price is ₹25 lakh, but estimated selling costs are ₹7 lakh because of heavy discounting and promotional spend required. The inventory has not yet been marked down. What is the correct carrying amount?

A ₹25 lakh – selling costs = ₹18 lakh (NRV basis)

B ₹20 lakh (cost, since higher than NRV)

C ₹25 lakh (selling price, since market is higher)

D ₹18 lakh only if impairment testing is performed annually

E ₹22 lakh (average of cost and NRV)

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A retailer holds seasonal fashion inventory purchased at

Solution