If net realizable value of the inventory is lower than its cost, the total assets on the statement of ﬁnancial position and net earnings on the statement of earnings will be reduced.

Question

Quizplus · Accepted Answer

This is because the inventory will need to be written down to the lower net realizable value, resulting in a decrease in assets and potentially a decrease in net earnings if the write-down is significant enough.

If Net Realizable Value of the Inventory Is Lower Than