6.2.5 Write Down of Inventories



Cost Estimated
Selling Price
Cost to
Sell/Distribute
Net
Realizable
Value
Drugs and Medicines 17,000 18,000 3,000 15,000
Supplies 3,000 0 0 3,000
Total
20,000 18,000 3,000 18,000


Net Realizable Value (NRV) of Inventories

Medicines (at cost):
Paracetamol (1,000pcs @ 40/pc)
Ampicilin (1,000pcs @45/pc)
Total
-
-
-
40,000
45,000
85,000


Difference between Cost and NRV:


Drugs and Medicines Supplies
Cost

NRV

17,000

15,000

2,000
3,000

3,000

=


Accounting Entry:

  • To write-down Drugs and Medicines to Net Realizable Value

    Inventories Expense

    Inventories

    2,000

    2,000
    To recognize the difference between the cost and NRV

    6.2.1 Impairment of Inventories

    Inventory Item Total
    Quantity
    Amount/pc Quantity of
    unexpired
    inventory
    Cost of
    unexpired
    inventory
    Quantity of
    expired
    inventory
    Cost of
    expired
    inventory
    Paracetamol 500 P 40 200 P 8,000 300 P 12,000
    Ampicilin 400 45 200 9,000 200 9,000
    Total


    P 17,000
    P 21,000


    Accounting Entry:

  • To record the cost of expired inventories

    Inventories Expense (due to expiration)

    Inventories

    21,000

    21,000
    To recognize the cost of expired inventories

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