The Lower of Cost or Market Rule Applies to the Write-Down

question 128

Multiple Choice

The lower of cost or market rule applies to the write-down of inventory values when market value exceeds cost. Why does this rule not allow for write-ups in inventory value?

• A)Write-ups in inventory value are more uncertain than write-downs.
• B)The most prudent approach to preparing financial statements involves avoidance of pessimistic projections regarding the company's future prospects.
• C)Writing up inventory to market value would be inconsistent with the conservatism principle.
• D)Write-ups in inventory value are inconsistent with the matching principle.

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Definitions:

Continental Markets

Markets that are primarily located on the European continent, often used in contrast with the British or other island markets.

Britain's Economy

Refers to the economic system and performance of the United Kingdom, characterized by its service sector, manufacturing, and international trade.

Revolutionary Period

A time of significant political and social upheaval, often characterized by the overthrow of established systems of government and the establishment of new, radical changes.

Jacobin Party

A political group during the French Revolution known for radical views and support for the lower classes, leading to the Reign of Terror.