Which Statement Is False Regarding the Lower-Of-Cost-Or-Market (LCM) Method of Inventory

question 7

Multiple Choice

Which statement is false regarding the lower-of-cost-or-market (LCM) method of inventory?

• A) LCM is an example of the revenue recognition principle.
• B) Market is defined as current replacement cost, not selling price.
• C) LCM is an example of an accounting concept of conservatism.
• D) Inventory is written down to its market value in the period in which the price decline occurs.

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Definitions:

Adjusted Cash Balance

The cash balance as per the company's records after making necessary adjustments for reconciling items with the bank statement.

Bank Statement

A document summarizing the financial transactions occurring within a specific period on a bank account.

Check Register

A record book or electronic log used to track checks written, deposits made, and current balances in a checking account.

Outstanding Deposits

Money that has been deposited into a bank account but has not yet been processed or credited to the account.