In Comparison to the Allowance Method of Applying the Lower

question 14

Multiple Choice

In comparison to the allowance method of applying the lower of cost or market rule to the valuation of inventory, the direct method has which of the following deficiencies?

• A) The direct method reports a more conservative amount for net income.
• B) For the direct method, the loss or loss recovery due to market valuation changes is included in the cost of goods sold amount.
• C) The direct method makes changes to the historical cost of inventory reported on the balance sheet.
• D) The direct method can only be used with a perpetual inventory system.

---

Definitions:

Legal Assistance

Professional aid provided by lawyers or legal professionals to individuals or organizations in understanding and dealing with legal issues.

Legal Services

Professional services provided by lawyers or other legal professionals, including advice, representation, and drafting of legal documents.

Costly

Involving great expense; items or actions that require a significant amount of money or resources.

Legal Aid

Assistance provided to individuals unable to afford legal representation and access to the court system.