Question & Answer: Inventory is carried at cost unless cost is greater than market or in certain cases can…..

Inventory is carried at cost unless cost is greater than market or in certain cases can be carried at selling price. What is the purpose of these exceptions?

Expert Answer

 

Cost of inventory directly affects the net operating income. If value of inventory is overstated, net operating in income will be overstated. If the value of inventory is understated, net operating income will also be understated.

To prepare and present financial statements in a most appropriate and fair manner inventory is reported at least of cost or market value.

Still stressed from student homework?
Get quality assistance from academic writers!