Which One of the Following Statements Regarding the Application of the Lower

question 52

Multiple Choice

Which one of the following statements regarding the application of the lower of cost or market method is true?

• A)Generally, market value is greater than replacement cost.
• B)When the lower of cost or market method is used, inventories are valued at selling price.
• C)The lower of cost or market method is most commonly applied on a total inventory basis because it is a more conservative approach.
• D)The lower of cost or market method is an exception to the historical cost principle.

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Definitions:

Earnings Per Share

A profitability metric that measures the amount of net income earned per share of a company's outstanding stock.

Dividends Per Share

The amount of dividend a company pays out for each share of its stock over a specific period, typically a quarter or year.

Net Income

The total profit or loss a company generates from its operations, calculated as revenues minus expenses, taxes, and additional costs.

Cash Dividend

A payment made by a corporation to its shareholders, the amount of which is determined by the company's board of directors, and is usually distributed in cash based on the profits earned.