Question

for purposes of accounting for inventory, net realizable value is defined as: multiple choice estimated selling price. estimated selling price less expected returns by customers. estimated selling price less any costs of completion, disposal, and transportation. estimated cost to replace the inventory.

Answer 1

The net realizable value of inventory is the estimated selling price minus any associated costs like completion, disposal, and transportation, which is important for accurate financial reporting. The correct answer is option: c) estimated selling price less any costs of completion, disposal, and transportation.

Step-by-step explanation:

For purposes of accounting for inventory, net realizable value is defined as the estimated selling price less any costs of completion, disposal, and transportation. This calculation ensures that the inventory is not recorded on the balance sheet at an amount greater than the amount that the company expects to receive from its sale, minus the costs necessary to make the sale. I

nventories are an important part of a business's current assets and can affect measurements such as national income, which includes all income earned such as wages, profits, rent, and profit income. Proper accounting of inventory is also necessary to avoid issues with double counting when measuring GDP. Depreciation is not typically considered in the calculation of net realizable value as it is already accounted for when calculating net national product (NNP), which is GDP minus depreciation.