When Applying Lower of Cost or Market, Market Value

question 2

Multiple Choice

When applying lower of cost or market, market value

• A)is defined as the selling price
• B)should not exceed the net realizable value
• C)should not exceed the net realizable value less an allowance for a normal profit margin
• D)should not exceed the net realizable value plus an allowance for a normal profit margin

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Definitions:

Fair Value

The estimated market value of an asset or liability, based on current conditions rather than historical cost.

Long-Term Investments

Investments in securities or other assets intended to be held for a period exceeding one year for capital growth or income generation.

Trading Investment

An investment in securities with the intention of selling them in the short term to profit from price changes.

Interest

The cost of borrowing money, usually expressed as a percentage of the amount borrowed, paid by the borrower to the lender.