Parrison Ltd is a manufacturing company The companys invento

Parrison Ltd is a manufacturing company. The company\'s inventory at 30 June 2018 includes the following items of work in progress: Product X 6,400 E8 £7 £2 Product Y Number of units held at 30 June 2018 Costs incurred per unit to date Estimated further costs per unit to completion Estimated selling costs per unit Estimated selling price per unit The company complies with IAS2 Inventories. 3,800 E12 £8 EA) £30 (d) (e) Explain how inventories should be measured in accordance with IAS2. Calculate the figure at which the work in progress of Parrison Ltd should be shown in the company\'s financial statements for the year to 30 June 2018.

Solution

d)As per IAS 2,Inventory should be valued at lower of cost or net realizable value(NRV) .In case NRV is lower than cost ,the loss should be immediately recognised.

Net realizable value equals estimated selling price -estimated cost to completion-estimated selling price

cost includes all cost incurred to make inventory ready for use.

e)

	Product X	Y
Cost	8	12
Net realizable value	15-7-2=6	30-8-4=18
Lower of cost or NRV	Lower of 8 or 6	Lower of 12 or 18
	$ 6	$ 12
Number of unit	6400	3800
Amount at which Work in process should be recorded in financial statement	6 *6400 = $ 38400	12*3800 = $ 45600