When the market value of inventory items has declined below their cost, which method would be the most appropriate in complying with GAAP?

Question

Quizplus · Accepted Answer

GAAP requires that inventory be reported at cost or market value, whichever is lower. This means that if the market value of inventory items has declined below their cost, the lower-of-cost-or-market method should be used to report inventory values. This method compares the original cost of the inventory to its current market value and reports the lower of the two as the inventory value.

When the Market Value of Inventory Items Has Declined Below