Question 1

SECTION B - CASE 2: BioHarvest Agri

BioHarvest Agri Co operates commercial vineyards. The year-end is 30 September 20X6.
By 30 September 20X6, BioHarvest had processed some of the harvested grapes into wine. The cost of the wine inventory (including the initial fair value of the grapes and processing costs) is $120,000. The expected selling price of this wine is $150,000. However, BioHarvest must spend $15,000 on bottling and $20,000 on marketing and distribution to sell the wine.

At what value should the wine inventory be stated in the Statement of Financial Position at 30 September 20X6?

Accepted Answer

1. Identify Cost. 2. Calculate Net Realizable Value (NRV) = Estimated selling price - Estimated costs of completion - Estimated costs necessary to make the sale. 3. Choose the lower of Cost and NRV.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to deduct the marketing and distribution costs when calculating NRV.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 1

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