(b) During the inventory count on 31 December, some goods which had cost $80,000 were foun

(b) During the inventory count on 31 December, some goods which had cost $80,000 were found to be damaged.

In February 2005 the damaged goods were sold for $85,000 by an agent who received a 10% commission out

of the sale proceeds. (2 marks)

Required:

Advise the directors on the correct treatment of these matters, stating the relevant accounting standard which

justifies your answer in each case.

NOTE: The mark allocation is shown against each of the three matters.

(b) The inventories should be valued at the lower of cost and net realisable value. Cost is $80,000, net realisable value is$85,000 less 10%, or $76,500. The net realisable value of $76,500 should therefore be taken (IAS2 Inventories)