Inventory Adjustment for Impairment and Theft

Steps:

• Identify impaired radios: 12 units with NRV of $8 each (cost$10), write-down per unit = $10 -$8 = $2; total write-down = 12 ×$2 = $24.
• Identify stolen radios: 4 units at cost $10 each; total removal = 4 ×$10 = $40.
• Sum adjustments: $24 (impairment) +$40 (theft) = $64 reduction from draft inventory value.
• Draft $1500 remains base, adjusted only for these issues.

Why A is correct:

• Follows IAS 2 rule: Inventory at lower of cost ($10) or NRV ($8) for impaired items, plus full derecognition of stolen assets.

Why the others are wrong:

• B: Overstates impairment by using incorrect NRV difference (e.g., $7 per unit).
• C: Includes extraneous costs, like total selling price impact.
• D: Miscalculates by applying uniform large write-down across all affected units.

Final answer: A