PRC-1 · Chapter 7 · Question 99 of 100
A business sends goods to a retail agent on a 'sale or return' basis. At the financial year-end, the agent has not yet sold these goods to end customers. How should these goods be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) They must be included in the business's closing inventory at cost or NRV.
Explanation
Because the goods are on 'sale or return', the risks and rewards of ownership have not fully transferred to the agent. The principal (the business) still owns them and must include them in its closing inventory.
More IAS 2: Inventories MCQs
- Q1Which of the following costs is NOT included in the cost of inventory according to IAS 2?
- Q2When calculating the Net Realizable Value (NRV) of an inventory item, which of the following is correct?
- Q3When inventory is sold, how is its carrying amount treated in the financial statements?
- Q4Which of the following statements correctly distinguishes between the periodic and perpetual inventory systems?
- Q5An entity suffered a loss of stock worth Rs. 80,000. It recovered 70% of the value in cash from its insurance company. Under a perpetual…