Reference no: EM132957329
On December 31, 2021, Pacific Trading Limited (PTL), a company which reports under IFRS, received merchandise that was damaged during shipment. Unfortunately, the contract terms were FOB Shipping Point and PTL was responsible for any damages during shipping. The amount of damage involved was too low to file an insurance claim. PTL has decided to repair and resell the damaged items as "refurbished" in January 2021.
The following information is available:
Product 1 Product 2
Volume 500 units 100 units
Cost (per unit) including allocated shipping costs as of December 31 $17 $250
Estimated sales price in January, after being refurbished (per unit) 28 180
Estimated cost to sell (per unit) (e.g. commission) 3 15
Estimated cost to rebuild (per unit) (to be incurred in January) 6 100
PTL has never previously impaired (written down) its inventory.
Hint:
REQUIRED
Problem 1. Calculate the net realizable value (NRV) for each Product on: (a) a per-unit basis, and
(b) a total basis (i.e. for all units of the Product). Insert your answers in the applicable parts of the following table.
Problem 2. Calculate the "cost" on a total basis and insert your answers in the applicable parts of the following table.
Problem 3. How much should each Product of inventory be impaired (written down) on a total basis (not per-unit)?
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