When Following U

question 18

Multiple Choice

When following U.S. GAAP, the lower-of-cost-or-market rule for inventory requires a firm to report ________.

• A) the inventory at the higher amount of cost or market on the balance sheet
• B) the difference between the cost basis and the market-based measure of inventory as a gain on the income statement
• C) the inventory at cost if the market value of inventory is higher than its cost basis
• D) the inventory at cost if the market value of inventory is lower than its cost basis

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Definitions:

Salaries

Payments made to employees for their services over a specified period.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue; also known as the bottom line.

Income and Losses

Represents the financial performance of a business, where income refers to the earnings and losses indicate the expenses exceeding earnings over a period.

Original Investments

The initial amount of money put into purchasing assets or starting a venture, setting the foundation for future growth or income.