Inventory is reported in the financial statements at Group of answer choicescost.marketthe higher-of-cost-or-marketthe lower-of-cost-or-market
Question
Inventory is reported in the financial statements at Group of answer choicescost.marketthe higher-of-cost-or-marketthe lower-of-cost-or-market
Solution
Inventory is reported in the financial statements at the lower-of-cost-or-market. This is in accordance with the accounting principle of conservatism, which prefers to record expenses and liabilities as soon as possible, but revenues and assets only when they are assured. So, if the market price of the inventory falls below its cost price, the inventory is written down to its market price.
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