For non-profit entities that are also merchandisers, inventory is valued at:
A) lower of cost and current replacement cost.
B) lower of cost and net realisable cost.
C) lower of cost and estimated selling price of the inventory.
D) net reliable cost.

Question

Quizplus · Accepted Answer

For non-profit entities that are also merchandisers, inventory is valued at the lower of cost and current replacement cost. This is because the primary objective of non-profit entities is not to make a profit from selling inventory, but rather to support their mission or cause. Therefore, it is appropriate to value inventory at its cost or current replacement cost, whichever is lower, in order to ensure that the entity is not overvaluing its inventory and potentially misleading stakeholders about the true level of resources available for its mission or cause.

For Non-Profit Entities That Are Also Merchandisers, Inventory Is Valued