PRC-1 · Chapter 7 · Question 21 of 100
A business bought 30 cars. Under which of the following circumstances would these cars be classified as 'Inventory'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The business is a car dealership buying them for resale.
Explanation
Inventories are assets held for sale in the ordinary course of business. If the business is a dealership, cars are its inventory. If used for operations (like sales team vehicles), they are Property, Plant and Equipment (IAS 16).
More IAS 2: Inventories MCQs
- Q23When a business records a write-down of inventory to Net Realizable Value, where is this expense initially recognized?
- Q24If an entity accidentally overstates its closing inventory value, what is the direct impact on the financial statements for that year?
- Q25Which of the following situations dictates that raw materials should NOT be written down below their cost?
- Q26How are trade discounts treated when determining the cost of inventory?
- Q27How should refundable sales taxes (e.g., input VAT) paid on the purchase of raw materials be treated?