When inventory is sold, its carrying amount is generally recognized as an expense in which period?
Correct answer: C. The period when the related revenue is recognized
- A. The period when the inventory is purchased
- B. The period when the inventory is manufactured
- C. The period when the related revenue is recognized
- D. The period when cash is collected from customers
Explanation
The carrying amount of inventory becomes an expense when the related revenue is recognized, applying the matching principle. Purchase, production, or cash-collection dates do not by themselves determine the expense period.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
Practise Inventory Valuation
34 free Inventory Valuation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Inventory Valuation questions
Under IAS 2, inventory is generally tested for a write-down to net realisable value on which basis?
A business has opening inventory of Rs. 30,000, purchases of Rs. 90,000 and closing inventory of Rs. 25,000. What is the cost of goods sold?
Which item is classified as a conversion cost of inventory?
When an earlier inventory write-down is reversed under IAS 2, the inventory's revised carrying amount cannot exceed: