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    Question

    Valuing inventory at cost or net realizable value is

    based on which principle?
    A Consistency Correct Answer Incorrect Answer
    B Conservatism Correct Answer Incorrect Answer
    C Going concern Correct Answer Incorrect Answer
    D Accrual Correct Answer Incorrect Answer

    Solution

    According to the Conservatism (Prudence) principle, expected losses should be recorded but gains should not. Hence, inventory is valued at lower of cost or net realizable value to avoid overstating assets.

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