Question

If on the date of the balance sheet a farm had 60,000 bushels of wheat in its inventory, which is being stored for future marketing, how would you handle it on a cost-basis balance sheet?

A. value it a market price and enter it as a non-current asset and enter it as a current asset and include deferred taxes in the current liabilities

B. value it production cost and enter it as a non-current asset and include it a deferred tax in non-current liability

C. value it production cost and enter it as a current asset but not as a deferred tax

D. value it a market price and enter it as a current asset and include deferred taxes in the current liabilities but not include it as a deferred tax

E. ignore it: it doesn't belong on a balance sheet

F. value it a market price and enter it as a current asset and include deferred taxes in the current liabilities

Answer 1

Inventory is a current asstes for the organization , which is recorded under current asset of the balance sheet.

In the given question a farm has 60000 bushels of wheat in its inventory, which is being stored for future marketing. Inventory to be recorded at:

(C) Production cost and enter it as a current asset in balance sheet but not as a deferred tax.

Because inventory are to be recorded at their cost.

If net realization value (NRV) is less then cost then NRV is to be recorded in balance sheet.