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Question
When valuing inventory at lower of cost or market value, what is the meaning of the term market value?
When valuing inventory at lower of cost or market value, what is the meaning of the term market value?
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Solution
The correct option is A Net realizable value
As
per AS-2, Valuation of inventories prescribed the accounting treatment for
inventories and sets the guidance to determine the value at which the
inventories are carried in the financial statement.
Net
realisable value is the estimated selling price in the ordinary course of
business less the estimated costs.
The
cost of inventories should comprise all costs of purchase, Costs of conversion
and other costs incurred in bringing the inventories to their present
location and condition.
As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs.
The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
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