Inventory - NRV On 1 January 2017, PP LLC purchased 15,000 tons of raw material and...

Inventory - NRV

On 1 January 2017, PP LLC purchased 15,000 tons of raw material and recorded inventory at 10,000 USD cost per ton, which included deferral of payment to supplier for three months for an additional charge of 10,000,000 USD and 50,000,000 USD import taxes, 20,000,000 USD bonus to CEO for best price attained, and 15,000,000 USD transportation costs. Average selling cost of inventory remained 1,500 USD per ton throughout the year.

Additional information:

Dates	Remaining balance (in units)	Selling price (in $)
01.01.2017	15,000	12,500
31.03.2017	12,000	10,500
30.06.2017	9,000	8,500
30.09.2017	6,000	9,500
31.12.2017	3,000	6,500

Required:

Compute the closing inventory on each date shown in the above table and respective gains and losses from fluctuations in NRV.

Expert Solution

Calculation of Correct Cost price of inventory

Cost taken	150,000,000
Less: Interest charge not to form part of inventory	10,000,000
Less: CEO bonus	20,000,000
Less: Transportation cost	15,000,000
Less: Import taxes not deducted assuming the same is non refundable	-
Cost of inventory	105,000,000
Per ton cost	7,000

Computation of closing inventory on each date

Dates	Remaining balance (in units)	Selling price (in $)	NRV	Cost price	Value of inventory
01.01.2017	15000	12500	11000	7000	7000*15000
31.03.2017	12000	10500	9000	7000	7000*12000
30.06.2017	9000	8500	7000	7000	7000*9000
30.09.2017	6000	9500	8000	7000	7000*6000
31.12.2017	3000	6500	5000	7000	7000*5000

Inventory has to be valued at cost or NRV, w.e. lower

ekkarill92 answered 1 year ago

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