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:

Liability

A financial debt or obligation that an entity is required to pay to another entity in the future.

Creditor

An individual, organization, or other entity that lends money or extends credit to another party.

Asset

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.

Invested Cash

Funds that are placed into a business by its owners or shareholders with the expectation of generating profits or income.