A company has inventory with a sales value of $34,000, current net realizable value of $22,000 and a total cost of $23,400. Since the sales value exceeds both cost and net realizable value, no write down in inventory value is required.

Question

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The inventory should be written down to its net realizable value ($22,000) because accounting principles require inventory to be reported at the lower of cost or net realizable value. Since the net realizable value is lower than both the sales value and the cost, a write-down is required.

A Company Has Inventory with a Sales Value of $34,000