In applying the lower of cost or market for tax purposes, the market price is the replacement cost of the goods, rather than their expected selling price.

Question

Quizplus · Accepted Answer

This statement is true. The lower of cost or market method for tax purposes requires the inventory value to be based on the lower of its cost or its market value. The market value is determined by the replacement cost of the goods, which represents the cost to replace the inventory at current market prices. This is different from the expected selling price, which is a future-oriented value and not relevant for determining the lower of cost or market.

In Applying the Lower of Cost or Market for Tax