5. GAAP requires reporting inventory at net realizable value, even if above cost, whenever there is a controlled market with a quoted price applicable to all quantities.
6. A reason for valuing inventory at net realizable value is that sometimes it is too difficult to obtain the cost figures.
7. In a basket purchase, the cost of the individual assets acquired is determined on the basis of their relative sales value.
8. A basket purchase occurs when a company agrees to buy inventory weeks or months in advance.
9. Most purchase commitments must be recorded as a liability.
10. If the contract price on a noncancelable purchase commitment exceeds the market price, the buyer should record any expected losses on the commitment in the period in which the market decline takes place.