Inventory valuation in case of branch transfers
This query is : Resolved
12 February 2017
A Ltd is into wholesale business. It has branches in Bangalore and Mumbai. Majority of its sales are in Mumbai. It imports goods in Mumbai @ rate of Rs.500 each. It sells the same in Bangalore. The cost of transport from Mumbai to Bangalore is Rs.2 per article. The net realisable value is Rs.520 per article. Should the inventory lying in Bangalore be valued at Rs.500 or Rs.502?
13 February 2017
As per AS -2 Valuation of inventory, the inventory should be valued at cost or NRV whichever is lower. Thus, if we consider the same it should be valued at Rs.500. However, Rs.2 is not the NRV, it is the actual cost incurred by the company for transportation. Thus, it has to be valued at Rs.502
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