Lower of cost and market
A)is most conservative if applied to the total inventory.
B)is most conservative if applied to major categories of inventory.
C)is most conservative if applied to individual items of inventory.
D)must be applied to major categories for taxes.

Question

Quizplus · Accepted Answer

Lower of cost and market is most conservative if applied to individual items of inventory because it ensures that each item is recorded at its current market value or cost, whichever is lower. This approach allows for a more accurate valuation of inventory and ensures that the financial statements reflect the true value of the inventory on hand. Applying it to major categories or the total inventory may result in over or under valuing certain items within those categories, leading to misstated financial statements.

Lower of Cost and Market