Many companies state in their annual reports that inventory is shown at the lower of its cost or market value.This means that the inventory:
A)Is obsolete.
B)Has been written down to a carrying value below cost.
C)Is shown at the lesser of cost or sales value.
D)Is valued at current replacement cost or historical cost,whichever is less.

Question

Quizplus · Accepted Answer

This accounting principle, known as the lower of cost or market (LCM) rule, ensures that inventory is reported on the balance sheet at either its historical cost or its current market value, whichever is lower. This approach is taken to ensure that the inventory's value is not overstated, reflecting potential losses in value due to market conditions or obsolescence without predicting future value increases.

Many Companies State in Their Annual Reports That Inventory Is