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CA Final · Financial Reporting · Ind AS 2 Inventories

Kaveri Auto Components Ltd bought 2,000 units of a part at ₹500 per unit. Costs: import duty ₹40,000 (non-refundable), GST of ₹1,80,000 fully recoverable as input tax credit, freight inward ₹30,000, trade discount received ₹50,000, and warehouse storage cost before sale ₹20,000 (not necessary for production). What is the cost of purchase of the inventory per Ind AS 2?

The cost is ₹10,20,000. Start with the purchase price of ₹10,00,000, add non-refundable import duty and freight inward, and deduct trade discounts. Recoverable GST is excluded and storage costs not necessary for production are expensed, not capitalised into inventory cost.

  1. A₹10,20,000Correct
  2. B₹10,00,000
  3. C₹10,40,000
  4. D₹12,20,000

Explanation

Cost = 10,00,000 (2,000 x 500) + 40,000 duty + 30,000 freight - 50,000 trade discount = 10,20,000. Recoverable GST is excluded and storage costs not necessary for production are expensed. Option C wrongly ignores the discount; option D wrongly includes recoverable GST.

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