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    Question

    VRN Ltd had 500 units of product Z on 31 March 2021. The

    product had been purchased at a cost of Rs.18 per unit and normally sells for Rs.24 per unit. Recently, product Z started to deteriorate but can still be sold for Rs.24 per unit, provided some rectification work is undertaken at a cost of Rs.3 per unit. What is the value of closing inventory at 31 March 2021?
    A 10500 Correct Answer Incorrect Answer
    B 12000 Correct Answer Incorrect Answer
    C 10000 Correct Answer Incorrect Answer
    D 11000 Correct Answer Incorrect Answer
    E 9000 Correct Answer Incorrect Answer

    Solution

    The inventory will be valued at cost or NRV whichever is lower.   Cost = 18 NRV = 24-3   = Rs.21 Lower of the two is 18 So value of inventory = 500*18 = Rs.9000  

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