Which of the following statement about the inventory write-down is not correct? * If the cost is lower than net realizable value, there is no accounting problem because the inventory is measured at cost and the increase in value is not recognized. The write down of inventory cost to lower of cost and net realizable value may be recorded using direct method or allowance method which may result to the same cost of sales amount. If the net realizable value is lower than cost, the inventory is measured at net realizable value and the decrease in value is recognized.
Which of the following statement about the inventory write-down is not correct? * If the cost is lower than net realizable value, there is no accounting problem because the inventory is measured at cost and the increase in value is not recognized. The write down of inventory cost to lower of cost and net realizable value may be recorded using direct method or allowance method which may result to the same cost of sales amount. If the net realizable value is lower than cost, the inventory is measured at net realizable value and the decrease in value is recognized.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Which of the following statement about the inventory write-down is not correct? *
If the cost is lower than net realizable value, there is no accounting problem because the inventory is measured
at cost and the increase in value is not recognized.
The write down of inventory cost to lower of cost and net realizable value may be recorded using direct method
or allowance method which may result to the same cost of sales amount.
If the net realizable value is lower than cost, the inventory is measured at net realizable value and the decrease
in value is recognized.
The amount of any write-down of inventories to net realizable value should be recognized as an expense in the
period the write down occurs.
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