Valuing Stocks

05 April 2007 |

The basic rule is that "stocks are valued at the lower of cost or net realisable value." Sometimes I get confused when the scenario is asked in a different way. Here are two scenarios that I want you to attempt:

Value the following items of stock:

  1. Material costing $12,000 bought for processing and assembly for a profitable special order. Since buying these items, the cost price has fallen to $ 10,000.
  2. Equipment constructed for a customer for an agreed price of $ 18,000. This has recently been completed at a cost of $ 16,800. It has now been discovered that, in order to meet certain regulations, conversion with an extra cost $ 4,200 will be required. The customer has accepted partial responsibility and agreed to meet half the extra cost.
What are your answers ? I am sure that you will get it right. Respond as comments on the blog.

Answer 1 : Value of Material is _____

Answer 2: Value of Equipment is _______

Give reasons for your answer..


Santosh Puthran

If you like this post, please tweet this or share this for the benefit of other readers.


Find out how you can promote yourself
Subscribe to MA updates Get the Latest via Email or RSS
  1. Management Accountant
  2. Accountancy News
  3. My Favorite Blogs that I track
  4. SAP Jobs & Opportunities

Enter your email address:

Delivered by FeedBurner