The lower of cost and net realizable value basis of valuing inventories ensures that inventories are
A) not over-valued.
B) not under-valued.
C) valued at their selling price.
D) valued at their current cost.

Question

Quizplus · Accepted Answer

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are not over-valued, as it values them at the lower of the cost or the net realizable value. This prevents overstating of inventory value on the balance sheet, leading to a more accurate financial picture of the company's assets.

The Lower of Cost and Net Realizable Value Basis of Valuing