Air Support Ltd manufactures long distance drones. The drones were developed primarily for use in the agricultural industry, but are now sought after by other industries for their ability to capture high-definition images and capacity to travel long distances. Air Support Ltd carries a range of drones with differing camera functionality and battery longevity. The following information applies to the drone and battery inventory at 30 June 2024.

Required

(a) Calculate the ending inventory value as at 30 June 2024, 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) Discuss the effect the application of the lower of cost and net realisable rule has on the financial statements of the business.

(c) Assume that at the end of 2025, 12 units of model Matrix Z100 drones are still on hand and the net realisable value is $4 450 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?

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Actual Model Drone: Matrix Z100 Quantity Cost Net Realisable Value 20 $4,500 $4,400 PJI Inspire 16 5,400 5,250 Sierra W22 8 9,000 9,200 Freedom Alta 10 17,000 18,000 Battery: Whisper 222 25 180 200 Zulu XXT 15 250 240