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?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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