A company's cost of inventory was $317,500. Due to phenomenal demand for this product, the market value of its inventory increased to $323,000. According to the consistency principle, this company should write up the value of its inventory.

Question

Quizplus · Accepted Answer

The consistency principle requires that companies use the same accounting methods over time, but it does not allow for writing up inventory to market value. Inventory is typically recorded at the lower of cost or market value, according to the lower of cost or market rule.

A Company's Cost of Inventory Was $317,500