Q4ISTQ - Intermediate Accounting (Kieso)

Question

Assume that Darcy Industries had the following inventory values. Inventory cost (on December 31, 2017) \(1,500 Inventory market (on December 31, 2017) \)1,350 Inventory net realizable value (on December 31, 2017) \(1,320 Under IFRS, what is the inventory carrying value on December 31, 2017? (a) \)1,500. (b) \(1,570. (c) \)1,560. (d) $1,320

Step-by-Step Solution

Answer

The correct option is “d.”

Step1: Estimation of inventory value

(d) The inventory cost is $1,500, and the net realizable value is $1,320. Hence inventories will be reported at the net realizable value, as it is the lowest compared to the inventory cost.

Step2: Explanation of wrong options

(a) Inventories carrying value will not be equal to the cost, as market value and NRV is below the original cost. 

(b) $1,570 incorrectly estimated. 

(c) $1,560 incorrectly estimated. 

Thus, the correct option is $1,320.