Which of the following assets is/are to be valued at the lower of cost and net realizable value?
Correct answer: B. Inventories
- A. Goodwill
- B. Inventories
- C. Investments
- D. Both B. and C. above.
Explanation
Inventories are generally measured at the lower of cost and net realisable value to prevent unrealised gains from being reported. Investments are normally measured under their applicable fair-value or investment-accounting rules, not this inventory rule.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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