When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?
A) Sales price net of conversion costs
B) Net realizable value
C) Historical cost
D) Net realizable value reduced by a normal profit margin

Question

Quizplus · Accepted Answer

When inventory declines in value below historical cost and this decline is considered other than temporary, the inventory can be valued at the net realizable value reduced by a normal profit margin. This is because the inventory cannot be sold at its original historical cost, and the expected revenue from its sale is the net realizable value, which should consider a normal profit margin.

When Inventory Declines in Value Below Original (Historical) Cost, and This