10.3 f f f Kellerstone Ltd buys used machines which it reconditions and sells on to customers. The company's inventory at the end of its most recent accounting period included the following machines: Purchase Reconditioning Expected further Expected price costs incurred costs before selling to date sale price Machine w 10,300 650 12,500 Machine X 15,750 400 17.500 Machine Y 18,450 2,100 23,000 Machine Z 8,300 9,500 52,800 2,000 3,400 62,500 Selling expenses are expected to absorb 4% of the expected selling price. (a) Explain why it is not permissible to value the inventory of machines at the lower of their total purchase price (52,800) and their total net realisable value. (b) Compute the value at which the inventory of machines should be measured in the company's financial statements. 850 500 900