The following information applies to the inventory of Carson’s Camera Store as at 30 June 2016:

Unit price (excluding GST)

Model number

Quantity

Actual cost

Net realisable value

Cameras: A-4 C-7 G-1 Z-8 Video equipment: BD-5 FY-9

18 12 20 6 15 10

$  95 100 65 50 180 240

$  75 120 60 55 190 220

Required

A. Calculate the ending inventory value as at 30 June 2016, applying the lower of cost and net realisable value rule to:

            1.   individual inventory items

            2.   major categories of cameras and video equipment

            3.   total inventory.

B.         What effect does application of the lower of cost and net realisable rule have on the financial statements of the business?

C.         Assume that at the end of the next financial year, 12 units of model A-4 are still on hand and the net realisable value is $80 per unit. How would this increase in net realisable value affect the inventory value of the 12 units.

D.        How would the increase in net realisable value in requirement C be treated in the accounting records?