The Use of the Lower-Of-Cost-Or-Market Method of Inventory Valuation Increases

question 38

True/False

The use of the lower-of-cost-or-market method of inventory valuation increases the gross profit for the period in which the inventory replacement price declined.

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Definitions:

Allowance Method

An accounting technique used to estimate and record bad debts expense from credit sales based on expected credit losses.

Uncollectible Account

An account receivable that cannot be collected due to the debtor being unable or unwilling to pay.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts, resulting in the distribution of assets to creditors and discharge of debts.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's receivables that may ultimately not be collected.