Which one of the following reflects the proper inventory valuation on a company's balance sheet?
A)Lower of original cost or face value
B)Net realizable value
C)Lower of cost or market
D)Expected selling price

Question

Quizplus · Accepted Answer

The proper inventory valuation on a company's balance sheet is lower of cost or market. This means that inventory is reported at the lower of its historical cost or its market value, where market value is the current replacement cost. This is a conservative approach as it recognizes that inventory may become obsolete, deteriorate, or lose its value over time. Option A is incorrect as face value is not relevant in inventory valuation. Option B is not appropriate as net realizable value is used in the valuation of accounts receivable, not inventory. Option D is incorrect as expected selling price does not necessarily reflect the true value of the inventory.

Which One of the Following Reflects the Proper Inventory Valuation