Which one of the following statements regarding the application of the lower of cost or market method is true?
A) The lower of cost or market method is most commonly applied on a total inventory basis because it is a more conservative approach.
B) The lower of cost or market method is an exception to the historical cost principle.
C) When the lower of cost or market method is used, inventories are valued at selling price.
D) Generally, market value is greater than replacement cost.

Question

Quizplus · Accepted Answer

The lower of cost or market method is an exception to the historical cost principle because it allows for the valuation of inventory at market value when this is lower than the historical cost, deviating from the usual practice of recording assets at their original cost.

Which One of the Following Statements Regarding the Application of the Lower