What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory?
a. Prevents understatement of the inventory value.
b. Allows for a normal profit to be earned.
c. Allows for items to be valued at replacement cost.
d. Prevents overstatement of the value of obsolete or damaged inventories.
Answer: d. Prevents overstatement of the value of obsolete or damaged inventories.
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Prices have risen 20%. What has happened to the value of the dollar:
A: It has gone down 16-2/3%; B: It has gone down 20%; C: It has gone down 25%; D: None of the preceding is correct.
Which of the following statements is most likely to be true regarding private ownership?
A. It reduces a nation's dynamism and its investments in innovation and creativity. B. It is most commonly found in command economies. C. It eliminates competitors and reduces pressure to lower production costs. D. It gives entrepreneurs an incentive to search for better ways of serving consumer needs. E. It is based on the philosophy that "the good of society is more important than the interests of an individual."