Which of the following is false concerning the lower-of-cost-or-net realisable value rule when it is applied to the valuation of inventory?
A) Inventory must be written up (increased) if the net realisable value of ending inventory is greater than the cost of ending inventory as estimated using the LIFO method.
B) Inventory must be written down (decreased) if the net realisable value of ending inventory is less than the cost of ending inventory as estimated using the average cost method.
C) Inventory must be written down (decreased) if the current market cost of ending inventory is less than the cost of ending inventory as estimated using the FIFO method.
D) Writedowns (decreases) are more common in times of rising prices when FIFO is used.

Question

Quizplus · Accepted Answer

This statement is false. Under the lower-of-cost-or-net realisable value rule, inventory must be written down (decreased) if the net realisable value of ending inventory is less than the cost of ending inventory, regardless of the inventory costing method used. There is no requirement to write up (increase) inventory if the net realisable value is greater than cost.

Which of the Following Is False Concerning the Lower-Of-Cost-Or-Net Realisable