CERTYNEX IFRS ACADEMY

Tavernay manufactures garden furniture. At the reporting date, the carrying amount of its finished goods inventory, 300,000, includes 18,000 of rent for the warehouse where the finished furniture awaits sale. What is the error?

The rent of the finished goods warehouse was included in the cost of inventories whereas it should have been expensed.

The costs of conversion for the period should have been expensed, only purchases of materials being includable in the cost of finished goods.

No error: any cost incurred before the sale is part of the cost of inventories.

The rent should indeed have been included, but in the cost of raw materials rather than in that of finished goods.