When the Net Realizable Value of Inventory Falls Below Its

question 78

True/False

When the net realizable value of inventory falls below its cost,no adjustment to the accounting records is needed.Companies are required to record an adjustment when net realizable value falls below cost.The adjustment has the effect of reducing assets and increasing expenses.

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Definitions:

Accounts Payable

A liability account on the balance sheet, representing the company's obligation to pay off a short-term debt to its creditors or suppliers.

Sales Tax Payable

The amount of sales tax collected from customers that a business owes to the government.

Sales Tax

A tax imposed by a government on the sale of goods and services.

List Price

The manufacturer's suggested retail price of a product before any discounts or allowances.