Which item is normally included in the cost of inventory under IAS 2?
Correct answer: B. Freight and handling charges on purchases
- A. Recoverable sales tax on purchases
- B. Freight and handling charges on purchases
- C. General administrative office salaries
- D. Advertising costs for finished goods
Explanation
Freight and handling charges are directly attributable to bringing inventory to its present location and condition. Recoverable sales tax, general administration and advertising are normally excluded from inventory cost.
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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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More Inventory Valuation questions
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