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23 December, 16:00

Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements is correct? Question 3 options: A) Cost is greater than net realizable value. B) NRV is greater than replacement cost. C) Cost is less than NRV minus a normal profit margin. D) Cost is less than net realizable value.

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  1. 23 December, 16:09
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    Answer:A. Cost is greater than net realisable value (NRV)

    Explanation:

    An inventory should not be higher than the price its sale or use and this requires the comparison of inventory cost to it's (NRV) and whichever is lower will be used as cost of inventory

    NRV = Sales price less cost to completion and less estimated cost necessary to make the sales.
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