When inventory is sold, its carrying amount is generally recognized as an expense in which period?
Correct answer: D. 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 cash is collected from customers
- D. The period when the related revenue is recognized
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.
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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.
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34 free Inventory Valuation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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More Inventory Valuation questions
Under IAS 2, inventory is generally tested for a write-down to net realisable value on which basis?
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When an earlier inventory write-down is reversed under IAS 2, the inventory's revised carrying amount cannot exceed: