When the replacement cost of inventory drops below the cost recorded in the financial records,applying the lower of cost or net realizable value (LC&NRV)rule means:

Question

Quizplus · Accepted Answer

The application of the lower of cost or net realizable value (LC&NRV) rule means that the inventory value is written down to its net realizable value, which is the amount expected to be received from selling the inventory. This results in a reduction in the value of inventory and an increase in the cost of goods sold, which ultimately reduces net income. Therefore, the correct answer is C.

When the Replacement Cost of Inventory Drops Below the Cost