The Lower of Cost and Net Realizable Value Basis of Valuing

question 8

Multiple Choice

The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

• A)valued at their current cost.
• B)not under-valued.
• C)not over-valued.
• D)valued at their selling price.

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Definitions:

Adjusting Entries

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditure to the period they actually belong.

Service-Type Business

A service-type business is an entity that provides intangible products or services to customers, rather than physical goods.

Accrual-Basis Accounting

Accounting basis in which companies record transactions that change a company's financial statements in the periods in which the events occur.

Cash-Basis Accounting

Accounting basis in which companies record revenue when they receive cash and an expense when they pay out cash.