Generally accepted accounting principles require that the inventory of a company be reported at:
A) Selling Price.
B) Historical cost.
C) Lower of cost and net realizable value.
D) Net realizable value.
E) Retail value.

Question

Quizplus · Accepted Answer

Generally accepted accounting principles require that the inventory be reported at lower of cost and net realizable value. This means that if the net realizable value (estimated selling price less estimated cost of completion and disposal) of the inventory is less than its cost, then the inventory must be written down to its net realizable value. This conservative approach ensures that the inventory is not overstated in the financial statements.

Generally Accepted Accounting Principles Require That the Inventory of a Company