Inventory Valuation Questions and Answers

According to IAS 2, inventory should be valued at the lower of

A company has three inventory items with the following details:

Mr Reedy sells goods at a mark-up of 25% on cost. Goods with a selling price of $6 250 were returned by a customer shortly after the year end, having been invoiced and delivered to the customer before the year end. What was the cost price of these returned goods?

Goods held in inventory had a cost of $7 500. They were damaged and could only be sold for $1 500 after incurring repair costs of $150. At what amount should these goods be included in inventory, applying the lower of cost and net realisable value rule?

Goods with a selling price of $12 500 (cost $10 000, based on Mr Reedy's 25% mark-up on cost) were sent to a customer on a sale or return basis before the year end. The customer had not yet indicated whether he would keep the goods. How should these goods be treated in the seller's closing inventory at the year end?

Unused stationery costing $3 500 had mistakenly been included in the physical count of trading inventory at 10 April 2016. How should this amount be treated when calculating the correct trading inventory figure?

Which of the following is an advantage of the FIFO (First In, First Out) method of inventory valuation, compared with AVCO (weighted average cost)?