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Inventory Valuation and Bank Reconciliation
Quick questions on Inventory valuation explained: O-Level Principles of Accounts
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is value each line separately?Show answer
The lower of cost and NRV is applied to each line (or category), not to the inventory as a whole. A profit expected on one line cannot be used to hide a loss on another.
What is effect on profit?Show answer
Closing inventory is deducted in cost of sales, so its value directly affects gross profit:
What is q1?Show answer
A line of inventory cost \3,000\. State the value used and the concept. [2 marks]
What is q2?Show answer
Closing inventory is overstated by \1,000$. State the effect on this year's gross profit. [1 mark]
What is q3?Show answer
Explain why inventory is not valued at expected selling price. [2 marks]
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