A company selling or disposing of an asset measures the asset at the lower of cost or net realizable value.

Question

Quizplus · Accepted Answer

This statement is true. The principle of measuring assets at the lower of cost or net realizable value is known as the lower of cost or market (LCM) rule and is a commonly used accounting principle. Essentially, it means that if an asset is worth less than its original cost, it should be written down to its net realizable value (i.e. the estimated amount that can be received from its sale). This ensures that assets are not carried on the balance sheet at values that exceed their potential economic benefits to the company.

A Company Selling or Disposing of an Asset Measures the Asset