Which of the following is not true regarding the lower-of-cost-or-market basis for inventory valuation?
A)It is a conservative accounting policy.
B)It recognizes losses from decreases in market value before a sale occurs.
C)It recognizes gains from increases in market value above original acquisition cost only when a sale occurs.
D)It reports inventories on the balance sheet at amounts that are never greater, but may be less, than acquisition cost.
E)It reports inventories on the balance sheet at amounts that are equal to the acquisition cost less a normal profit margin.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market basis for inventory valuation does not report inventories on the balance sheet at amounts that are equal to the acquisition cost less a normal profit margin. This statement is false. The correct statement would be that it reports inventories on the balance sheet at amounts that are never greater, but may be less, than acquisition cost.

Which of the Following Is Not True Regarding the Lower-Of-Cost-Or-Market