If the Selling Price of Inventory That Has Been Written

question 4

Multiple Choice

If the selling price of inventory that has been written down to net realisable value in a prior period, subsequently recovers, the:

• A) previous amount of the write-down can be reversed;
• B) carrying amount of the inventory cannot be adjusted;
• C) value adjustment can be recognised immediately in equity;
• D) adjustment must be recognised in a 'provision for future inventory write-downs' account.

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Definitions:

EVA

Economic Value Added represents a metric for assessing a company's financial success, determined by subtracting the cost of capital from the operating profit to calculate the leftover wealth.

Residual Income

Income that remains after all personal debts and expenses have been paid, or in corporate finance, the amount of net income left over after paying out dividends to shareholders.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital in which each category of capital (debt, equity, etc.) is proportionately weighted, reflecting the cost of financing new projects based on the company's existing capital structure.

Deferred Payment Incentive

A compensation structure where part of an individual's or entity's payment is postponed to a future date, often used as an incentive or reward.