Which item is deducted from the purchase price when determining the cost of inventory under IAS 2?
Correct answer: A. Trade discounts received from suppliers
- A. Trade discounts received from suppliers
- B. Carriage paid on incoming purchases
- C. Import duties paid on purchases
- D. Non-refundable taxes paid on purchases
Explanation
Trade discounts and similar rebates reduce the purchase cost of inventory. Carriage, import duties and non-refundable taxes are normally included when they are directly attributable to bringing inventory to its present location and condition.
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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.
Practise Inventory Valuation
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
Raw materials may remain measured at cost rather than being written down when:
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Which cost is included in inventory when it is directly attributable to bringing the goods to their present condition?
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When inventory is bought on deferred settlement terms containing a financing element, the difference between the cash price and the total payment is generally treated as: