Under GAAP, when inventory is valued at the "lower of cost or market," "market" typically means:
A) Appraised value
B) Replacement cost
C) Historical cost
D) Net realizable value

Question

Quizplus · Accepted Answer

When inventory is valued at the "lower of cost or market," "market" typically means the replacement cost, which is the cost that would be incurred to acquire the inventory at the current time. This is because the goal of valuing inventory at the lower of cost or market is to ensure that the inventory is not overstated on the balance sheet, which could result in a misrepresentation of the company's financial position. Using the replacement cost as "market" ensures that the inventory is valued at a realistic and current price.

Under GAAP, When Inventory Is Valued at the "Lower of Cost