The inventory record of Palm Springs Ltd.shows 1,000 surf boards on stock that cost $50 each.During the last stock take,the accountant noted 100 old style surf boards with net realisable amount of $15.What journal entry would be required of Palm Springs to comply with AASB 102?
E) E: None of the given answers.

Question

Quizplus · Accepted Answer

Palm Springs Ltd. needs to make an adjustment to their inventory record for the 100 old style surf boards that have a net realisable amount of $15. This means that the old style surf boards have decreased in value by $35 each ($50 cost - $15 net realisable value). The journal entry required to comply with AASB 102 is:

Dr. Inventory Adjustment (expense)   $3,500
Cr. Inventory                                 $3,500

Option C is the correct journal entry as it includes a debit to an inventory adjustment expense account and a credit to the inventory account.

The Inventory Record of Palm Springs Ltd