State Company manufactured a machine at a cost of $80,000. The product is sold for $88,000 at a 5% discount. The delivery costs are estimated to be $8,000. Under IFRS, how much should be the carrying amount of this inventory?
A) $80,000
B) $88,000
C) $72,000
D) $75,600

Question

Quizplus · Accepted Answer

Under IFRS, the carrying amount of inventory should include all costs incurred to bring the inventory to its present location and condition. This includes the cost of manufacture ($80,000) and any additional costs directly attributable to the production of the inventory (in this case, delivery costs of $8,000). The discount given to the customer is not relevant to the carrying amount of inventory. Therefore, the carrying amount of the inventory would be $80,000 + $8,000 = $88,000, less a provision for any impairment (if necessary). However, the answer choices do not include this exact amount, but the closest option to this amount is D, which is $75,600.

State Company Manufactured a Machine at a Cost of $80,000