Question 1

A fashion retail company has 1,000 winter coats in inventory at year-end. The coats cost $50 each to manufacture. Due to an unseasonably warm winter, the expected selling price has dropped to $45 each. The company pays a 10% sales commission on all sales. What is the total value of this inventory in the Statement of Financial Position?

Accepted Answer

Calculate Cost. Calculate NRV (Estimated Selling Price - Estimated Costs to Sell). Compare the two and pick the lower figure. Multiply by the quantity.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to deduct the sales commission when calculating NRV, leading to option B.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 4

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