When Inventory Is Valued at the Lower of Cost or Net

question 112

Short Answer

When inventory is valued at the lower of cost or net realizable value, the accountant is applying the principle or convention called----------- .

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Definitions:

Common Stock Dividends Distributable

A portion of earnings allocated by a company to be distributed to holders of its common stock, recognized as a liability until paid out.

Paid-in Capital

Equity capital that is contributed to a corporation by its shareholders, in addition to the prescribed par value, representing funds received from investors.

Cumulative Preferred Stock

A type of preferred stock that entitles the shareholder to receive dividends that, if omitted, accumulate and must be paid before dividends can be paid to common shareholders.

Annual Dividend

The total amount of dividend payments made to shareholders in a year.