#38 Inventory valuation

As at balance sheet date, client need to value its stocks. Assuming Client ABC has only one stock, Product Y on hand.
Let's consider the following different circumstances, ( assuming balance sheet date is 31 Dec 2007)

1) Client ABC bought Product Y at US$ 2.00 in Aug 2007. They sold Product Y at US$ 2.50 in Dec 2007. How should the client value the stocks ? Should the company use cost or realizable value ( its selling price) to value the stocks?

2) Client ABC bought Product Y at US$2.00 in Aug 2007. The client priced Product Y at US$2.50 and they are unable to sell any single stocks. Hence, the management decided to give discount and sell the stocks at US$1.50 in Dec 2007. How should the client value the stocks? Should the company use cost or realiable value (its selling price) to value the stocks.
[ Refer to next posting coming up for answer]