Question

When the value of inventory falls below its cost, companies other than those that use LIFO have the option of recording the inventory at cost or the lower net realizable value. True False 25 135 When the net realizable value of inventory falls below its cost, no adjustment to the accounting records is needed True False 016 18 The adjustment to write down inventory from cost to its lower net realizable value includes a debit to Cost of Goods Sold and a credit to Inventory. True False

Answer 1

4)

Answer- FALSE

Companies should value Inventories at cost or net realizable value whichever is lower, whatever is the method of inventory followed by the company either FIFO, LIFO or weighted average method.

5)

Answer- FALSE

When net realizable value falls below cost, entry should be passed for inventory loss by charging to profit and loss.

6)

Answer- TRUE

Entry should be passed by debiting cost of goods sold and crediting inventory.