When Applying the LCM, the Following Is True

question 42

Multiple Choice

When applying the LCM, the following is true:

• A) The inventory account remains at its original value.
• B) A contra account to inventory is used.
• C) COGS rises when ending inventory is reduced to market value.
• D) LCM can only be applied to individual items.

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Definitions:

Liabilities

Financial obligations or debts owed by a company to external parties, which must be settled over time through the transfer of assets, provision of services, or other means.

Future Transactions

Financial dealings or agreements set to occur at a future date, often involving the purchase or sale of goods, services, or assets.

Separate Entity Assumption

Business transactions are separate from the transactions of owners.

Liabilities

Obligations owed by a business to individuals or other entities, ranging from loans and mortgages to accounts payable.