Question

Producers inventories like livestock, agricultural and forest products, mineral oils, ores and gases are valued at__________.

• A. cost price
• B. least of cost and market price
• C. net realizable value
• D. market value

Answer 1

Answer: (C)

net realizable value

Normally, the valuation of inventory is done on the basis of cost or market/ net realizable value whichever is lower. In case of manufacturers inventory would be at its cost to produce the item, however, if the net realizable value of such inventory is less than the cost, the net realizable value will be shown as inventory value in balance sheet.

There is not process of finding out the actual cost of live stocks, agricultural and forest products, hence the valuation of inventory is done on the basis of net realizable value.