Question

By-products should be valued at:

• A. Cost
• B. Cost or net realizable value whichever is more
• C. Net realizable value
• D. Cost or market value whichever is less

Answer 1

Answer:

B. Cost or net realizable value whichever is more

The valuation of inventory should be based on prudence concept of accounting. This concept states that if the net realizable value of inventory is lower than its original cost, then it should be valued at its net realizable value. On the contrary, inventory should be shown at cost price. This means inventory should be valued at lower of cost or net realizable value