When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.

Name: When the value of inventory is lower than its cost, the inventory is written down to its net realizable value.
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Quizplus · Accepted Answer

This accounting practice is in accordance with the lower of cost or market rule, which states that inventory should be reported at the lower of its historical cost or its net realizable value. This ensures that the inventory is not overstated on the financial statements.

When the Value of Inventory Is Lower Than Its Cost