What Is the Rationale Behind the Ceiling When Applying the Lower-Of-Cost-Or-Market

question 115

Multiple Choice

What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory?

• A) Prevents understatement of the inventory value.
• B) Allows for a normal profit to be earned.
• C) Allows for items to be valued at replacement cost.
• D) Prevents overstatement of the value of obsolete or damaged inventories.

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