Alton Downs Ltd has an orchard of citrus trees with an estimated net realisable value at 1 January 20X1 of $1 600 000.During the year ended 31 December 20X1 fruit with an estimated fair value of $300 000 was picked.The fruit was still on hand at the end of the year.Estimated sales commission on this fruit was .Costs of picking,sorting,packing and storage totalled $125 000.The fruit was sold in 20X2 (after the 20X1 financial statements were prepared)for $430 000.On 31 December 20X1 the orange orchard had an estimated net realisable value of $1 550 000.The fruit on hand at 31 December 20X2 should be valued at:
$$\$ 25000$$

Question

Quizplus · Accepted Answer

The fruit should be valued at its net realisable value, which is the estimated fair value ($300,000) minus the costs to sell (sales commission and other costs). Since the costs of picking, sorting, packing, and storage total $125,000, the net realisable value is $300,000 - $125,000 = $175,000. However, the question seems to imply a sales commission, which is not specified, so assuming no additional commission, the value would be $275,000.

Alton Downs Ltd Has an Orchard of Citrus Trees with an Estimated