When the value of inventory is higher than its cost, the inventory is written down to its net realizable value at the end of the period.

Question

Quizplus · Accepted Answer

This accounting practice is in accordance with the lower of cost or market rule, which states that if the market value (net realizable value) of the inventory is lower than its cost, the inventory should be written down to its market value, reflecting a more accurate value on the financial statements.

When the Value of Inventory Is Higher Than Its Cost