Inventory that originally cost $20,000 was written down to its net realizable value of $18,500 in the last accounting period. At the end of the current accounting period, the net realizable value is determined to be $23,000. At what amount should the inventory be reported on the current period's statement of ﬁnancial position?

Question

Quizplus · Accepted Answer

Under the lower of cost or market rule, if the market value (net realizable value) of inventory decreases below its cost, the inventory is written down to its market value. However, if in a subsequent period the market value increases, the inventory is not written up beyond its original cost. Therefore, the inventory should be reported at its original cost of $20,000.

Inventory That Originally Cost $20,000 Was Written Down to Its