The lower-of-cost-or-market rule implies that it is unrealistic to carry inventory at a cost that is in excess of its market value.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market rule means that if the market value of inventory declines below its original cost, then the inventory should be reported at the lower of its cost or market value. This means it is unrealistic to carry inventory at a cost that is in excess of its market value. Therefore, the statement is true.

The Lower-Of-Cost-Or-Market Rule Implies That It Is Unrealistic to Carry