If the net realizable value of a merchandising company's inventory is higher than its cost
A) no actions should be taken.
B) the company's ending owner's equity should be increased to reflect this.
C) the inventory accounts should be debited and a gain should be reported.
D) the inventory account should be debited and cost of goods sold credited.

Question

Quizplus · Accepted Answer

Under the lower of cost or market rule, if the net realizable value of inventory is higher than its cost, no adjustment is made. The inventory remains valued at cost on the balance sheet.

If the Net Realizable Value of a Merchandising Company's Inventory