Which One of the Following Statements Is True with Regard

question 77

Multiple Choice

Which one of the following statements is true with regard to the lower of cost or market rule?

• A)If the direct method is used in applying the lower of cost or market rule, the loss or loss recovery due to market valuation changes is included in cost of goods sold.
• B)The lower of cost or market rule must be applied on an individual item basis for financial accounting purposes.
• C)With the application of the lower of cost or market rule using the direct method, the account, Allowance to Reduce Inventory to Market, is reported on the balance sheet as a contra asset.
• D)The lower of cost or market rule is primarily an application of the going concern assumption.

---

Definitions:

Welfare Payments

Government-provided financial assistance to individuals or households, typically aimed at supporting those who are unemployed, disabled, or on a low income.

Efficiency Loss

The reduction in economic welfare or efficiency that occurs when a market does not allocate resources optimally, often due to externalities or market power.

Demand Curves

A visual depiction showing how the price of a product relates to the amount people want to buy.

Supply Curves

Graphical representations of the relationship between the price of goods and the quantity that producers are willing to supply.