Accounting Online Program Certification Practice Test

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Prepare for the Accounting Online Program Certification Test. Use flashcards and multiple choice questions with detailed explanations. Ace your accounting certification exam with confidence!

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What is the initial cost of inventory for Mickey Ltd before sales?

£8,500
£7,500
£6,600
£12,000

The correct answer is: £8,500

The initial cost of inventory is calculated based on the total expenditures incurred to acquire the inventory before any sales occur. This includes all direct costs associated with bringing the inventory to a usable or saleable condition. In the case of Mickey Ltd, if £8,500 has been identified as the initial cost, it likely includes the purchase price of the inventory along with any additional costs such as shipping, handling, and other expenses necessary to prepare the inventory for sale. When determining the initial cost, it is essential to be mindful of the costs that directly impact inventory valuation under accounting principles, such as the cost of goods purchased plus any associated costs. As a result, £8,500 represents the total and comprehensive expenditure for the inventory acquired by Mickey Ltd before they commence sales activities.