Kensington Plc,an Irish Company,is an importer and retailer of Danish made glass crystals.For the year ended 30 June 2012,Kensington Ltd plc holds 30 units of an item originally purchased for €10 000 each and a net realisable value of €8000.On 1 June 2013 the TV show Home Improvement featured a similar item prompting an increase in demand for this glass crystal.Management believes that the net realisable value of this item is now €15 000.All 30 items remain unsold on 30 June 2013.What is the effect of holding this inventory on the statement of comprehensive income of Kensington Plc for the years ended 30 June 2012 and 2013?

Question

Quizplus · Accepted Answer

In 2012, the inventory is written down to the net realisable value, decreasing profit by €60,000 (30 units x (€10,000 - €8,000)). In 2013, the increase in net realisable value allows a reversal of the write-down, increasing profit by €60,000 (30 units x (€15,000 - €10,000)).

Kensington Plc,an Irish Company,is an Importer and Retailer of Danish