The lower-of-cost-or-market rule requires a company to report inventories at the lower of:

Question

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The lower-of-cost-or-market rule requires a company to report inventories at the lower of historical cost (what was paid for it) or current replacement cost (the cost to replace the inventory at current market prices). This is to ensure that overstated inventory values do not lead to overstated profits. Current sales price (A) and sales invoice price (C) are not relevant to the lower-of-cost-or-market rule. FIFO cost or LIFO cost (D) are methods of accounting for inventory, but not relevant to the lower-of-cost-or-market rule.

The Lower-Of-Cost-Or-Market Rule Requires a Company to Report Inventories at the Lower