Lancashire Hotpot Ltd manufactured an item of inventory for a customer at a cost of 1,200, but the item was rejected as it did not meet the customer's specifications. The inventory item could be sold elsewhere in its present form for 800, or it could be re-worked at an additional cost of 300 and could then be sold for 1,300. The original selling price was 1,400.

REQUIRED:

Indicate the value at which should the inventory item should be included in the financial statements.

Give reasons for your answer.