Question

X Co. Ltd purchased goods at cost of ₹ 40,00,000 in October 2014 . Till March, 2015, 75% of the stocks were sold. athe company wants to disclose Closing Stock at ₹ 10 lakhs. The expected sale value is ₹ 11 lakhs and a commission at 10% on sale is payable to the agent . Advise, what is the correct closing stock to be disclosed as at 31-03-2015 .​

Answer 1

Answer:

As per para 5 of AS 2 ' Valuation of Inventories', the inventories are to be valued at lower of cost or net realizable value.

In this case, the cost of inventory is ₹ 10 lakhs. The net realizable value is 11,00,000 x 90% = ₹ 9,90,000. So, the stock should be valued at ₹ 9,90,000.