Question

Data related to the inventories of Costco Medical Supply are presented below: Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling price $ 265 $ 132 $ 352 $ 159 Cost 163 100 252 159 Costs to sell 26 11 32 7 In applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at: Multiple Choice $163. $181.

Answer 1

Answer:

$163

Explanation:

The accounting standard for Inventory under IFRS IAS 2 requires that inventory be recognized at cost which includes all the cost incurred to bring the item of inventory to a state or place where the item of inventory becomes available for sale.

These costs includes cost of purchase, freight, Insurance cost during transit etc.  

Subsequently, inventory is to be carried at the lower of cost or net realizable value.  The net realizable value is the difference between the cost and cost to sell.

Given;

   Surgical Equipment    Surgical Supplies  Rehab Equipment Rehab Supplies Selling price $ 265                $ 132                        $ 352                  $ 159

Cost               $ 163                 $ 100                       $ 252                  $ 159

Costs to sell   $ 26                  $ 11                          $ 32                    $ 7

Net realizable  $ 239               $ 121                       $ 322                 $ 152

Applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at

= $163