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Net Realizable Value

Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements are correct?

Cost is greater than NRV is greater than
net realizable value replacement cost

A. Yes Yes
B. No No
C. Yes No
D. No Yes

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C is the correct answer. Please look at the rationale below.

Net realizable value (NRV) is a method of evaluating an asset's worth when held in inventory, in the field of accounting. NRV is part of the Generally Accepted Accounting Principles that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. ...

Solution Summary

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