CA Foundation · Accounting · Inventories
Kapoor Enterprises bought 1,000 units of raw material at a list price of ₹80 per unit. It was allowed a trade discount of 10% on the list price. It paid non-recoverable purchase taxes of ₹4,000, freight inward of ₹6,000 and, after the goods arrived, godown rent of ₹3,000 for storing them before use in production. GST paid of ₹12,960 is fully recoverable as input credit. What is the cost of purchase of the raw material under AS 2?
The cost of purchase is ₹82,000. List price of ₹80,000 less 10% trade discount gives ₹72,000, plus non-recoverable taxes of ₹4,000 and freight inward of ₹6,000. Recoverable GST and subsequent storage rent are excluded under AS 2.
- A₹82,000Correct
- B₹85,000
- C₹94,960
- D₹88,000
Explanation
Purchase price after trade discount = 1,000 × 80 × 90% = ₹72,000. Add non-recoverable taxes ₹4,000 and freight inward ₹6,000 = ₹82,000. Recoverable GST is excluded. Godown rent for storage is not a cost of purchase unless needed in the production process, so including it gives the wrong figure of ₹85,000.
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