Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and
A) the ending inventory is determined by a physical inventory count.
B) a normal profit is not anticipated.
C) there is a controlled market with a quoted price applicable to all quantities.
D) the internal revenue service is assured that the practice is not used only to distort reported net income.

Question

Quizplus · Accepted Answer

Recording inventory at net realizable value is permitted above cost when there is a controlled market with a quoted price applicable to all quantities. This means that there is a market for the inventory where all participants have equal access to the price at which the inventory can be sold. In such a market, the net realizable value is a more reliable indicator of the inventory's value than its cost.

Recording Inventory at Net Realizable Value Is Permitted, Even If