ACCA Applied Knowledge · Financial Accounting · Inventories
Kestrel Co bought 1,000 units of a component for $12 each. It paid $800 for delivery to its warehouse, $300 for import duties that are not recoverable, and $500 for storage costs after the goods arrived, which were not necessary for production. A trade discount of $600 was received on the purchase. What is the cost of the inventory under IAS 2?
The inventory cost is $12,500. This is the purchase price of $12,000 plus delivery of $800 and non-recoverable import duties of $300, less the $600 trade discount. The $500 storage costs are excluded because they are not necessary to bring the goods to their present location and condition.
- A$12,500Correct
- B$12,000
- C$12,700
- D$13,000
Explanation
Cost = purchase price 12,000 + delivery 800 + duties 300 - discount 600 = 12,500. Storage after arrival that is not necessary for production is excluded and expensed. $13,000 wrongly includes storage and ignores the discount adjustment.
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