When Applying the Lower of Cost or Market Rule to Inventory

question 30

Multiple Choice

When applying the lower of cost or market rule to inventory valuation, market generally means

• A) current replacement cost.
• B) original cost.
• C) resale value.
• D) original cost, less physical deterioration.

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Definitions:

Proximately Caused

Refers to an event sufficiently related to a legally recognizable injury to be held as the cause of that injury.

Horizontal Privity

A legal term referring to the relationship between parties with coordinating interests in a property, often in lease agreements.

Vertical Privity

A legal concept relating to the chain of ownership or rights that exist in contracts, specifically in property law and warranties, where obligations are passed down.

Privity Of Contract

A doctrine which states that contracts are binding only upon the parties who enter into them, and only these parties have the right to sue to enforce their terms.