Question

Josh Kuchin is studying for the next accounting mid- term examination. What should Josh know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of ""net realizable value"" in the lower-of-cost-or-net realizable value method?

Answer 1

Answer and Explanation:

The cost basis of accounting males use of the original value of an asset or purchase price of the asset usually for tax purposes. This value is used to calculate the capital gain of the asset, which is equal to the difference between the original cost of the asset and the current market value of the asset(how much it can be bought now)

Net realizable value abbreviated NRV is the fixed or current cost of am asset held in the inventory. The GAAP(General Accepted Accounting Principles) and IFRS (international financial reporting standards) have standards for valuing inventory so as not to overstate or underestimate inventory value. The net realizable value is difference between the selling price of an asset and the cost of completion or selling the asset.