Net realisable value of inventory is best defined as:
Correct answer: B. Estimated selling price less completion and selling costs
- A. Historical cost plus expected profit
- B. Estimated selling price less completion and selling costs
- C. Selling price less the original purchase cost
- D. Replacement cost less accumulated depreciation
Explanation
NRV represents the estimated amount expected from selling inventory in the ordinary course of business. The estimate is reduced by costs still required to complete and sell the inventory.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
Practise Inventory Valuation
34 free Inventory Valuation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Inventory Valuation questions
A business has 100 units costing Rs. 10 each and 200 units costing Rs. 13 each. Under the weighted average cost method, the cost per unit is:
During a period of rising prices, which method generally reports the highest closing inventory value?
Which inventory cost flow method is not permitted under IAS 2?
A company buys 500 units at Rs. 20 each and 300 units at Rs. 24 each. If it sells 400 units and uses FIFO, the cost of goods sold is:
Which cost is normally excluded from the cost of inventory under IAS 2?
If ending inventory is understated by Rs. 10,000, assuming no other errors, what is the effect on current-year profit?