Accounting for IGCSE & O level - Final Statements (Section 10 - No. 27)
In what situations is the net realisable value of inventory likely to be less than cost?
The goods have been damaged.
There are no further sales.
The goods are obsolete.
The selling price of similar goods in the market has fallen.
Explanation
Net realisable value (NRV) is the estimated selling price less costs to sell. If goods are damaged, obsolete or if their selling prices have fallen in the market, then NRV will be less than cost.
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