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Net Realizable Value of Inventory: Definition & Method

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

The return that you would expect to get on an item after the item has been sold and the cost of selling that item has been subtracted is called what?

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1. NRV is calculated by subtracting which of the following from the sales price of an item?

2. What concept states that inventory is valued at the lower of the total cost of purchasing the material or the current market replacement cost?'

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About This Quiz & Worksheet

Gauge your knowledge of the Net Realizable Value (NRV) with this quiz. You'll have to be able to differentiate between market ceiling and market floor to score well.

Quiz & Worksheet Goals

Be prepared for questions about:

  • How to calculate NRV
  • When inventory is valued at the lower of the total cost of purchasing the material or the current market replacement cost
  • Alternate term for market ceiling
  • Importance of the current market price

Skills Practiced

  • Information recall - remember what price is used to value inventory if the current market price of an item falls between the market ceiling and the market floor
  • Knowledge application - use your knowledge to identify the return that you would expect to get on an item after the item has been sold and the cost of selling that item has been subtracted
  • Reading comprehension - ensure that you draw the most important information from the related NRV lesson

Additional Learning

The lesson titled Net Realizable Value of Inventory: Definition & Method will teach you more about:

  • The importance of NRV to a company
  • Difference between market ceiling and market floor
  • What happens when the market price is higher than the market ceiling
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