The lower-of-cost-or-market rule:
A) Is used in conjunction with the other inventory cost flow assumptions.
B) Cannot be used if LIFO or FIFO are also used.
C) Can be used in conjunction with LIFO but not FIFO.
D) Can only be used with the specific identification cost flow assumption.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market (LCM) rule is used in conjunction with the other inventory cost flow assumptions such as FIFO, LIFO, or weighted-average cost method. The LCM rule requires businesses to value their inventory at the lower of the cost or market value, ensuring that inventory is not overstated in the financial statements. Therefore, option A is the correct choice.

The Lower-Of-Cost-Or-Market Rule