Neco 2021 Financial Accounting Question 27

Practice objective / multiple choice question 27 from the 2021 Neco Financial Accounting examination.

Neco 2021 Financial Accounting Objective / Multiple Choice Easy Difficulty

Question 27 NECO • 2021 • FINANCIAL_ACCOUNTING • objective

Assume a business is no longer considered a going concern. Explain how the valuation of its inventory on the balance sheet should be determined, and state the accounting principle that justifies this treatment.

Answer Options

A. Inventory should be valued at net realizable value only, as per the fair value principle.

Correct Answer B. Inventory should be valued at the lower of cost and net realizable value, in accordance with the conservatism (lower of cost and NRV) principle.

C. Inventory should be valued at historical cost, following the historical cost principle.

D. Inventory should be valued at the higher of cost and net realizable value, according to the prudence principle.

Correct Answer

Correct Option:

Inventory should be valued at the lower of cost and net realizable value, in accordance with the conservatism (lower of cost and NRV) principle.

About This Question

This is Neco 2021 Financial Accounting Question 27. It is one of the objective questions from the 2021 Neco Financial Accounting examination.

Difficulty level: Easy .

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