Question

S of december 31, year 2, a company has an inventory item that was originally purchased for $80 in year 1. The inventory item was written down to its net realizable value of $60 as of december 31, year 1. As of december 31, year 2, the inventory item had a net realizable value of $75 and a replacement cost of $65. Normal profit margins for this company are 20%. Under ifrs, what is the carrying amount of the inventory item as of december 31, year 2?

Answer 1

: This answer is correct.

Under IFRS, inventories are measured at the lower of cost or net realizable value (NRV). NRV is assessed each period. Accordingly, a write-down may be reversed but not above original cost. Thus, the inventory is reported on 12/31/Year 2 at its NRV of $75. The $15 ($75 NRV on 12/31/Year 2 - $60 reported on 12/31/Year 1) of the write-down recognized in Year 1 of $20 ($80 historical cost - $60 NRV on 12/31/Year 1) is reversed in Year 2 and recognized in Year 2 profit or loss.$\huge\red{Rate brainly}$