Historical Cost of Inventory

Question

What is the Historical Cost of Inventory?

Answer 1

Historical Cost of Inventory: Historical cost of inventory signifies the buying cost of inventory. As per rule, we compute value of inventory on the basis of historical cost and market cost which ever will be low. For illustration, you are wholesaler  you had purchased inventory at the cost of $ 100 but now, similar inventory, you and other wholesaler are purchasing on $ 90. Therefore, net realizable value is less than the historical cost. Therefore we will compute inventory at $90.