Why Do Accountants Criticize the Practice of Carrying Inventories at Estimated

question 63

Multiple Choice

Why do accountants criticize the practice of carrying inventories at estimated net realizable values?

• A) The costs of producing the products are usually estimates.
• B) There is usually no clearly defined realizable value for any inventories.
• C) In effect, this practice recognizes income before sales are made.
• D) It will result in higher cost of goods sold and lesser profits.

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Definitions:

Parliamentary Authority

A set of rules that governs how procedures are carried out in a deliberative assembly, especially within a legislature following the parliamentary system.

Indirect Tax

A tax collected by an intermediary (such as a retailer) from the person who bears the ultimate economic burden of the tax (such as the consumer).

Stamp Distributers

Individuals or entities tasked with distributing stamps, often in historical contexts related to taxes or postal services, such as the Stamp Act of 1765 which imposed a direct tax by the British Parliament on the colonies.

Grenville

Richard Grenville was a British naval commander and explorer remembered for his role in the early English attempts at colonizing Roanoke Island in present-day North Carolina.