CFA Level I · CFA Level I Exam · Analysis of Inventories
A retailer buys 10,000 units at a list price of 20 each. It receives a 5% trade discount, pays freight-in of 4,000 and import duties of 6,000, and incurs 3,000 of storage costs before the goods are sold. Under IFRS, the cost of the inventory is closest to:
The inventory cost is about 200,000. The purchase price after the 5% trade discount is 190,000, and freight-in of 4,000 and import duties of 6,000 are added. The 3,000 storage cost is expensed rather than capitalised, so it is excluded from inventory cost.
- A190,000
- B200,000Correct
- C203,000
Explanation
List price 200,000 less 5% discount of 10,000 gives 190,000. Add freight-in 4,000 and duties 6,000 to get 200,000. Storage of 3,000 is expensed, so it is excluded. Using 203,000 wrongly includes storage, while 190,000 omits freight and duties.
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