PRC-1 · Chapter 7 · Question 39 of 100
A business sends goods to an agent on a 'sale or return' (consignment) basis. While the goods remain unsold by the agent, how should they be treated in the accounts of the business (the consignor)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) They must remain included in the business's inventory until sold to a third party.
Explanation
Because the risks and rewards of ownership have not yet transferred (the agent can return them), the consignor still owns the goods and must include them in their closing inventory.
More IAS 2: Inventories MCQs
- Q41If an entity mistakenly understates its opening inventory value, what is the direct impact on the current year's financial statements?
- Q42Which of the following best explains why closing inventory is deducted in the Cost of Sales calculation?
- Q43A business bought 100 units at Rs. 50 each. It paid Rs. 500 for delivery of the batch. Two units were found to be completely destroyed…
- Q44What is the primary reason IAS 2 requires inventory to be written down to Net Realizable Value when it falls below cost?
- Q45Are borrowing costs (such as interest on a short-term bank loan used to buy raw materials) included in the cost of inventory?