If the Net Realizable Value of a Merchandising Company's Inventory

question 93

Multiple Choice

If the net realizable value of a merchandising company's inventory is higher than its cost

• A) no actions should be taken.
• B) the company's ending owner's equity should be increased to reflect this.
• C) the inventory accounts should be debited and a gain should be reported.
• D) the inventory account should be debited and cost of goods sold credited.

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Definitions:

Employed

Refers to individuals who are currently working in a paid job or running a business.

Units

Basic quantities or measurements, such as pieces or liters, used to quantify the amount of a product or substance.

Marginal Revenue Product

The additional revenue generated by employing one more unit of input, such as labor, in the production process.

Resource

An input used in the production of goods or services, such as labor, land, capital, and technology.