Net realisable value of inventories may fall below cost for a number of reasons including: I. $\quad$Product obsolescence
II. $\quad$Piysical deterioration of irventories
III. $\quad$Arl increase in the expected replacernent costs of the irventories
IV. $\quad$Arl increase in the estirnated costs of completion
V. $\quad$An error in quartities purchased causing overstocking
A) I, II, IV and V only
B) I, IV and V only
C) II, III and IV only
D) I, II and V only

Question

Quizplus · Accepted Answer

Product obsolescence, physical deterioration, an increase in the estimated costs of completion, and errors in quantities purchased causing overstocking can all lead to the net realisable value of inventories falling below cost. An increase in the expected replacement costs does not directly affect the net realisable value of existing inventories.

Net Realisable Value of Inventories May Fall Below Cost for a Number