CA Foundation · Accounting · Inventories
Kapoor Industries has the following items at year-end: raw materials ₹4,00,000; work in progress ₹1,50,000; finished goods ₹3,00,000; loose tools used in production over several years ₹60,000; and standby machinery spares usable only with a specific plant, ₹90,000. Considering the meaning of inventories in AS 2, the amount to be reported as inventories is:
Inventories are ₹8,50,000, being raw materials ₹4,00,000, work in progress ₹1,50,000 and finished goods ₹3,00,000. Loose tools used over several years and spares usable only with a specific plant are treated as fixed assets, not as items held for sale or consumption in production.
- A₹8,50,000Correct
- B₹9,40,000
- C₹9,10,000
- D₹10,00,000
Explanation
Inventories = raw materials 4,00,000 + WIP 1,50,000 + finished goods 3,00,000 = ₹8,50,000. Loose tools used over several periods and spares used only with a specific plant are treated as fixed assets, so they are excluded. Adding the spares gives 9,40,000, which is the key wrong option.
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