Lower-of-cost-or-net realizable value as it applies to inventory is best described as the
A) reporting of a loss when there is a decrease in the future utility below the original cost.
B) method of determining cost of goods sold.
C) assumption to determine inventory flow.
D) change in inventory value to net realizable value.

Question

Quizplus · Accepted Answer

Lower-of-cost-or-net realizable value is a method of inventory valuation in which inventories are valued at the lower of their cost or net realizable value. This means that if the future utility of inventory decreases below its original cost, it must be reported at the lower value, which results in a loss.

Lower-Of-Cost-Or-Net Realizable Value as It Applies to Inventory Is Best