Under the lower-of-cost-or-net realizable value basis in valuing inventory, net realizable value is the
A) net amount a company expects to receive from the sale of inventory.
B) selling price.
C) historical cost plus 10%.
D) selling price less markup.

Question

Quizplus · Accepted Answer

Net realizable value is the amount a company expects to receive from the sale of inventory, so under the lower-of-cost-or-net realizable value basis, inventory is valued at the lower of its historical cost or net realizable value. Therefore, A is the correct choice. B, C, and D are not correct because they do not accurately describe net realizable value or how inventory is valued under this basis.

Under the Lower-Of-Cost-Or-Net Realizable Value Basis in Valuing Inventory, Net