Wonder if anybody could help me with this problem.
Client uses FIFO for stock control.
1) Buys 100 units for $100/unit on 1st Jan.
2) Sells 100 units on 1st Feb.
3) Buys 100 units for $50/unit on 1st Mar
4) Sells 100 units on 1st Apr
5) Stock (100 units) sold on 1st Feb is returned.
What is the valuation of the stock on the balance sheet?
Is it $10,000 or $5,000?
Thanks in advance.
Sorry to hear about the London subway blast today, hope the incident didn't ruin too many lives. May God guide those killed in the blast to heaven.
Yet Kek Hong
Replies (3)
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volatility
with such a widely fluctuating price you would have to question the validity of FIFO
FRS2: Inventories
£Nil- as the inventory has been returned it may be faulty!!
But on a more serious note, one would think £10,000 as that is the price of the actual stock now held, however, NRV would have to be considered and hence a more reasonable current price of £5,000 should be applied.
A purpose of FIFO is to help ensure that the stock valuation reflects the most current valuation.