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 $ \$ 25000 $.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:

Question

Quizplus · Accepted Answer

The fruit on hand at the end of 20X1 should be valued at the lower of the estimated net realisable value ($1 550 000) less estimated costs to complete and sell ($125 000) and the fair value ($300 000) less estimated sales commission (11% of $300 000 = $33 000). Thus, the value of the fruit on hand at the end of 20X1 should be $275 000 ((1 550 000 - 125 000) < (300 000 - 33 000)).

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