Damaged merchandise that can be sold only at prices below cost should be valued at

A) net realizable value
B) LIFO
C) FIFO
D) average cost

Damaged merchandise that can be sold only at prices below cost should be valued at net realizable value, which is the estimated selling price minus the costs of completion, disposal, and transportation. This approach ensures that inventory is not overstated in the balance sheet and reflects the lower market value of the damaged goods. Using LIFO, FIFO, or average cost methods would not be appropriate as they assume that all inventory has the same selling value and would not account for the impairment of specific items.