PRC-1 · Chapter 7 · Question 27 of 100
How should refundable sales taxes (e.g., input VAT) paid on the purchase of raw materials be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Excluded from the cost of raw materials and recorded as a receivable.
Explanation
Because the tax is refundable from the tax authorities, it does not represent a net cost to the business. It is excluded from inventory cost and recorded as a current asset (receivable).
More IAS 2: Inventories MCQs
- Q29In a manufacturing entity, which of the following items is considered 'Work in Progress' (WIP)?
- Q30Which inventory valuation method assumes that the items of inventory that were purchased or produced first are sold first?
- Q31Which of the following is NOT a disclosure requirement specified in IAS 2?
- Q32Under a periodic inventory system, how is the 'Cost of Sales' figure derived at the end of the accounting period?
- Q33Which of the following scenarios REQUIRES the use of the 'Specific Identification' cost formula under IAS 2?