Skip to content

CA Final · Financial Reporting · Ind AS 2 Inventories

Meera Textiles Ltd. purchased 10,000 metres of fabric at Rs 200 per metre. Trade discount received was 5% on the invoice price. Non-refundable import duty was Rs 40,000 and freight inward was Rs 30,000. Recoverable GST of Rs 3,00,000 was paid and will be claimed as input credit. Storage costs of Rs 20,000 were incurred after the fabric reached the warehouse, and were not necessary for production. What is the cost of the fabric as inventory?

The cost is Rs 19,70,000. Invoice value of Rs 20,00,000 less the 5% trade discount gives Rs 19,00,000. Add non-refundable import duty of Rs 40,000 and freight of Rs 30,000. Recoverable GST and unnecessary storage costs are excluded from the cost of purchase.

  1. ARs 19,70,000Correct
  2. BRs 20,00,000
  3. CRs 19,90,000
  4. DRs 22,70,000

Explanation

Invoice price = 10,000 x 200 = Rs 20,00,000. Less 5% trade discount (Rs 1,00,000) = Rs 19,00,000. Add non-refundable duty Rs 40,000 and freight Rs 30,000 = Rs 19,70,000. Recoverable GST is excluded, and the storage cost is not necessary to bring inventory to its present location and condition, so it is an expense. Rs 19,90,000 wrongly adds storage.

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