MCQs on IAS-2 Inventories

What is the primary objective of IAS 2?

• To prescribe tax treatment for inventories

• To ensure accurate valuation of inventories in financial statements

• To classify inventories as long-term assets

• To measure inventories at fair value

IAS 2 does NOT apply to:

• Finished goods in a manufacturing company

• Raw materials held for production

• Work in progress under construction contracts

• Goods held for resale

Which of the following inventories are covered under IAS 2?

• Biological assets related to agriculture

• Financial instruments

• Goods held for resale

• Construction contracts

Inventories are assets that are:

• Held for sale in the ordinary course of business

• Used as fixed assets in the company

• Intangible assets used for research and development

• Financial assets such as shares and bonds

According to IAS 2, inventories should be measured at:

• Cost only

• Net realizable value only

• Lower of cost and net realizable value (NRV)

• Market value

Which of the following is included in the cost of inventories?

• Purchase cost including import duties and transport

• Selling and distribution costs

• Administrative overheads

• Abnormal waste

Which of the following costs is NOT included in inventory valuation?

• Abnormal waste

• Direct labor

• Conversion costs

• Freight costs

Which inventory valuation method assumes that the oldest inventory items are recorded as sold first?

• Last-In, First-Out (LIFO)

• First-In, First-Out (FIFO)

• Weighted Average Cost (WAC)

• Specific Identification

Which cost formula calculates inventory cost as the average cost of all items available?

• FIFO

• LIFO

• Weighted Average Cost (WAC)

• Specific Identification

Which inventory valuation method is NOT allowed under IAS 2?

• FIFO

• Last-In, First-Out (LIFO)

• Weighted Average Cost (WAC)

• Specific Identification