Nazeer is a trader. He provided the following information about his inventory at 30 November 20–8:

Nazeer had to pay carriage inwards on inventory code number BD20 at the rate of $5 per 100 units (not included in the cost per unit shown in the table).

a. Explain the meaning of the following terms used in connection with inventory valuation:

i.  Cost
ii. Net realisable value

b. Name one accounting principle Nazeer should apply when valuing his inventory.
c.  Calculate the total value of Nazeer’s inventory on 30 November 20–8.

After the preparation of the financial statements for the year ended 30 November 20–8 Nazeer discovered that the inventory had been understated by $15.

d. Complete the following table by placing a tick (✓) to show the effect of this error.

Transcribed Image Text:

Inventory code Number of units in Cost per unit Selling price per unit number inventory BD20 300 1.50 2.30 BD23 119 0.95 0.80 BD29 410 1.78 1.85