Which of the following is a justification for valuing inventory above historical cost? Inability to determine...
Which of the following is a justification for valuing inventory above historical cost?
Inability to determine appropriate prices
Interchangeability of the units of inventory
All of the items listed are justifications for valuing inventory above historical cost
Immediate marketability of the inventory at a quoted market price
Homework Answers
Answer : All of the items listed are justifications for valuing inventory above historical cost.
Explanation: As per Chapter 4 of ARB No - 43 (Inventory Pricing), cases where inventory can be value above historical cost are as follows :-
- When inventory has feature of interchangeability of the units.
- When there is inability to determine appropriate costs or prices (for eg. in case of by -products).
- When an immediate marketability of the inventory at a quoted market price is present (for eg. in case farm commodities)
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