When inventory declines in value below original cost, and the decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?
A) Historical cost
B) Net realizable value less a normal profit margin
C) Sales price less a standard mark-up
D) Net realizable value

Question

Quizplus · Accepted Answer

When inventory declines in value below its original cost and the decline is considered other than temporary, the maximum amount that the inventory can be valued at is its net realizable value. This is in accordance with the lower of cost or market rule, which dictates that inventory should be reported at the lower of its historical cost or its net realizable value.

When Inventory Declines in Value Below Original Cost, and the Decline