Skip to content

CA Final · Financial Reporting · Ind AS 2 Inventories

Kaveri Engineering Ltd manufactures pumps. In the current year it incurred: raw materials purchased Rs 40,00,000 (net of trade discount) plus non-refundable import duty Rs 2,00,000 and inward freight Rs 1,00,000; direct labour Rs 10,00,000; factory overheads Rs 5,00,000; selling expenses Rs 3,00,000; storage cost of finished pumps after production, not necessary for production, Rs 1,50,000. All costs relate to the pumps produced, which are all unsold at year end. What is the cost of inventories?

The cost of inventories is Rs 58,00,000. It includes purchase price, non-refundable import duty, freight, direct labour and factory overheads. Selling expenses and storage costs not necessary for production are excluded from cost and recognised as expenses in the period.

  1. ARs 58,00,000Correct
  2. BRs 61,00,000
  3. CRs 59,50,000
  4. DRs 56,00,000

Explanation

Cost = purchase 40,00,000 + duty 2,00,000 + freight 1,00,000 + labour 10,00,000 + factory overheads 5,00,000 = Rs 58,00,000. Selling expenses and storage not necessary in the production process are excluded and expensed. Including selling expenses (Rs 61,00,000) is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 2 Inventories shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 2 InventoriesFree diagnostic mock

More Ind AS 2 Inventories questions