Briar Ltd acquired short-term investments for $100 000 on 31 March 2012.By 30 June 2012 (balance sheet date),the market value had slipped to $85 000.Briar Ltd uses the lower of cost or net realisable value rule.How would the reduction in value of $15 000 be recorded in the accounts for year ended 30 June 2012?

Question

Quizplus · Accepted Answer

The reduction in value of $15,000 would be recorded as an expense because Briar Ltd uses the lower of cost or net realisable value rule. This means that investments are valued at the lower of their cost or net realisable value, and any decrease in value must be recognized as an expense in the income statement.

Briar Ltd Acquired Short-Term Investments for $100 000 on 31