Question:
The use of the lower of cost or net realizable value (LCNRV) method to value inventory for reporting purposes is a departure from the accounting principle of:
A) Historical cost.
B) Matching.
C) Going concern.
D) Conservatism.
Answer:
The Right answer is A) Historical Cost.
Explanation:
Inventories are recorded at their cost. If inventory declines in value below its original cost, a major departure from the historical cost principle occurs.
Whatever the reason for a decline-damage, physical deterioration, obsolesce, changes in price levels, or other causes, a company should write down the inventory to Lower-of-Cost or Net Realizable Value (LCNRV) to report this loss.
A company abandons the historical cost principle when the future utility (revenue-producing ability) of the asset drops below its original cost.
Net Realizable Value refers to the net amount that a company expects to realize from the sale of inventory. Specifically, net realizable value is the estimated selling price in the normal course of business minus estimated costs to make a sale.
Example
Inventory Value - Unfinished $2,000
Less: Estimated Cost of Completion $ 50
Estimated Cost to sell <u>200</u> <u> 250</u>
<u>Net Realizable Value 750</u>
<u />
Cheers!
Answer:
A failure of the financial sector.
Explanation:
Financial sector indicates all banks and non-banking institutions. These sectors are the source of money supply in an economy. If this sector fails to do such work, the economy might face severe money crisis and the effect would be immediate. An example of it is 2007-08 depression in the US economy.
These consider many variables simultaneously and weight these according to a scheme that mirrors societal perceptions. It is a rating scale made up of several items, each of which is a separate question or statement that must be evaluated. Subjects will be able to explain their feelings about many aspects of their professions using a multi-item measure.
This will considerably increase the measure's precision and validity. As a result, multi-item measures are among the most essential and widely utilized tools in social research. Multiple-item scales are intended to sample a broader range of interpretations in order to capture the entire spectrum of a construct.
To learn more about multi-item, click here.
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