Valuing inventory at the lower of cost or market is an application of the:
A)time period assumption.
B)realization principle.
C)going concern principle.
D)conservatism principle.
E)None of the answers are correct.

Question

Quizplus · Accepted Answer

Valuing inventory at the lower of cost or market is an application of the conservatism principle, which requires that when there are two acceptable accounting alternatives, the one that results in less net income and less asset amount should be chosen. By valuing inventory at the lower of cost or market, a company is being conservative and recognizing any potential losses in value of inventory, which helps to avoid overstating assets and net income.

Valuing Inventory at the Lower of Cost or Market Is