The following information applies to the inventory of Carson’s Camera Store as at 30 June 2019.

Required

(a) Calculate the ending inventory value as at 30 June 2019, applying the lower of cost and net realisable value rule to:
i. individual inventory items 

ii. major categories of cameras and video equipment 

iii. total inventory.

(b) What effect does application of the lower of cost and net realisable value rule have on the financial statements of the business?

(c) Assume that at the end of the next financial year, 12 units of model A‐4 are still on hand and the net realisable value is $80 per unit. How would this increase in net realisable value affect the inventory value of the 12 units?

(d) How would the increase in net realisable value in requirement (c) be treated in the accounting records?

Transcribed Image Text:

Unit price (excluding GST) A-4 C-7 G-1 Z-8 Model number Quantity Actual cost Cameras: 6206 18 $ 95 12 100 8288 65 50 Net realisable value $ 75 120 60 55 Video equipment: BD-5 15 180 190 FY-9 10 240 220