Question

For purposes of allocating joint costs to joint products, the estimated net realizable value at split-off is equal to A. final sales price reduced by cost to complete after split-off. B. sales price less a normal profit margin at the point of sale C. separable product cost plus a normal profit margin. D. total sales value less joint costs at point of split-off.

Answer 1

A. Final sales price reduced by cost to complete after split-off.

Step-by-step explanation:

Net realizable value (NRV) is explained here to be the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with the eventual sale or disposal of the asset. It is a common method used to evaluate an asset's value for inventory accounting. NRV is a valuation method used in both Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

Many business transactions allow for judgment or discretion when choosing an accounting method.

A conservative approach means that the accountant should use the accounting method that generates less profit and does not overstate the value of assets.