A firm is following generally accepted accounting principles if it reports merchandise inventory on the balance sheet at its expected selling price.

Question

Quizplus · Accepted Answer

Merchandise inventory should be reported on the balance sheet at its cost (which includes purchase price and all costs necessary to get the merchandise ready for sale). Reporting inventory at its expected selling price would overstate the value of inventory and violate the principle of conservatism in accounting.

A Firm Is Following Generally Accepted Accounting Principles If It