The Following Information Pertains to Inventory Held by a Company

question 30

Multiple Choice

The following information pertains to inventory held by a company at December 31, 2011. $$\begin{array} { | l | r | } \hline \text { Historical cost } & \$ 25,000 \\\hline \text { Replacement cost } & \$ 20,000 \\\hline \text { Net realizable value } & \$ 21,000 \\\hline \text { Normal profit Margin } & 20 \% \\\hline\end{array}$$
-What is the amount of inventory loss shown on the income statement under IFRS?

• A) $1,000.
• B) $2,000.
• C) $4,000.
• D) $5,000.
• E) $6,000. The amount of loss is the writedown of inventory from $25,000 to $21,000 = $4,000.

---

Definitions:

Revenue

The total amount of income generated by the sale of goods or services related to the company's primary operations.

Noncompete Clauses

are contractual agreements that restrict one party from engaging in similar business or trade in competition against another party.

Anti-Trust Laws

Legislation aimed at promoting competition and preventing monopolies by regulating anti-competitive practices.

Freedom of Contract

The principle that individuals have the liberty to enter into agreements as they choose without unjust government interference.