Page 59 - Accountancy_F5

Solution 2.4
(a) The cost of shoes = Purchases costs + Associated costs
(b) The cost of damaged shoes = TZS 18,000 × 10 = TZS 180,000
The net realisable value of shoes = Sales proceeds – Cost of making sales proceeds
= 17,500 × 10 = TZS 175,000
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Cost of making the sales = Repairs costs = TZS 1,000 × 10 = TZS 10,000.
The net realisable value = TZS 175,000 – TZS 10,000 = TZS 165,000

(c) The value to be included in the financial statement
The value = the lower between cost and net realisable value
The lower between the two is TZS 165,000
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The value to be included in the financial statement = TZS 165,000
(d) The cost remains the same TZS 180,000
Net realisable value = (TZS 19,500 × 10) – TZS 10,000 = TZS 185,000
The lower between the two is TZS 180,000. Therefore, inventory should be
recorded at this figure.

Example 2.5
Given the following data, which value should be used as the closing inventory as of
31 December, 2021?
st
(a) Cost as of 31 December 2021 = TZS 100,000
st
(b) NRV as of 31 December 2021 = TZS 150,000
st
(c) Cost as of 1 January 2021 = TZS 50,000
st
(d) NRV as of 1 January 2021 = TZS 40,000
st

Solution 2.5
The correct answer is (a). According to accounting principles, inventory should be
reported at the lower cost or NRV. As of 31 December, 2021, the cost is TZS 100,000
st
and the NRV is TZS 150,000. Therefore, the lower value, TZS 100,000, should be used
as the closing inventory.

Exercise 2.2
(a) Blue Dental Care Ltd. is a company that manufactures dental care products, including
toothpaste, toothbrushes, and mouthwash. As of 31 August 2023, the company’s
st
inventory had a total cost of TZS 13,200,000 and a projected sales value of TZS
15,000,000. Following an inspection by the medical regulator, Blue Dental Care
Ltd. is required to repackage its entire inventory to meet the recommended design
standards. The repackaging process will incur a total cost of TZS 2,200,000.

Student’s Book Form Five
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