Asked by zachery spence on May 21, 2024
Verified
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
Net realizable value
The estimated selling price of goods, minus the cost of their sale or disposal.
Damaged merchandise
Goods that have been physically harmed or impaired, reducing their value or usefulness.
Below cost
describes selling a product at a price less than its production or acquisition cost, often to clear inventory or attract customers.
- Understand and apply the concept of net realizable value for damaged goods.
Verified Answer
TC
Tejaswini ChintapalliMay 21, 2024
Final Answer :
A
Explanation :
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.
Learning Objectives
- Understand and apply the concept of net realizable value for damaged goods.
Related questions
Damaged and Obsolete Goods That Can Be Sold ...
'Net Realisable Value' of Inventories Is Defined in AASB 102 ...
When Determining the Net Realisable Value of Inventories, Estimates Must \quad ...
Net Realisable Value of Inventories May Fall Below Cost for ...
AASB 102 Inventories Requires Service Providers to Write Down Their ...