Asked by Gbeho Rodrigue on Jul 17, 2024
Verified
Inventory that originally cost $11,200 was written down to its net realizable value of $9,400 at the end of 2021.At the end of 2022, the net realizable value is determined to be $11,700.At what amount should the inventory be reported on the December 31, 2022 statement of financial position?
A) $11,700
B) $11,200
C) $9,700
D) $9,400
Net Realizable Value
Net Realizable Value is the estimated selling price of goods, minus the estimated costs of completion and necessary selling costs, used for inventory valuation and accounts receivable.
Inventory
The merchandise and supplies a company maintains with the end purpose of selling or manufacturing.
- Implement the principle of valuing inventory at the lower of cost or net realizable value.
Verified Answer
CL
Conesha LishbrookJul 21, 2024
Final Answer :
B
Explanation :
Under the lower of cost or market rule, once inventory is written down, any subsequent recoveries in value are not recognized until the inventory is actually sold. Therefore, the inventory should be reported at its written-down value of $11,200, the original cost, because the recovery exceeds the original cost, and the write-down does not reverse.
Learning Objectives
- Implement the principle of valuing inventory at the lower of cost or net realizable value.