If recent changes have rendered a company’s inventory obsolete, how should this inventory be valued in the financial statements?

Show Answers

Adjusted down to zero or to its salvage valueReported on the Balance Sheet at its current replacement costDisplayed at original cost but categorized as a long-term assetMaintained at historical cost in the accounts until it is disposed ofNot applicable

Explanation

Obsolete inventory should be written down to its net realizable value, which is typically zero or its scrap value, to reflect its diminished worth accurately. Reporting it at replacement cost or original cost misrepresents its value, and keeping it at cost until sale can distort financial statements.