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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 Going concern Correct Answer Incorrect Answer
    C Conservatism Correct Answer Incorrect Answer
    D Accrual Correct Answer Incorrect Answer

    Solution

    Explanation: 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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