Question

Generally accepted accounting principles require that the inventory of a company be reported at:

1) Market value.
2) Historical cost.
3) Lower of cost or market.
4) Replacement cost.

Answer 1

Historical Cost, Market or Fair Value.

Step-by-step explanation:

Companies are required under GAAP to report their account based on acquisition cost instead of Market or Fair value. This principle is believed to present more reliable information as market value could harbour subjective or biased market values. However, it is also regarded as irrelevant, prompting most firms to report at market value. Under the GAAP, both principles are allowed.