The lower of cost or net realizable value rule requires a business to report inventory at original cost or its current replacement cost, whichever is lower.

Question

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The statement is true. The lower of cost or net realizable value rule is an accounting principle that requires a business to report inventory at the original cost or its current replacement cost, whichever is lower. This rule ensures that inventory is properly valued on the balance sheet and avoids overvaluing inventory, which could result in misleading financial statements.

The Lower of Cost or Net Realizable Value Rule Requires