Which Statement Concerning Lower of Cost or Market (LCM) Is

question 191

Multiple Choice

Which statement concerning lower of cost or market (LCM) is incorrect?

• A) LCM is an example of a company choosing the accounting method that will be least likely to overstate assets and income.
• B) Under the LCM basis, market does not apply because assets are always recorded and maintained at cost.
• C) The LCM basis uses current replacement cost because a decline in this cost usually leads to a decline in the selling price of the inventory item.
• D) LCM is applied after one of the cost flow assumptions has been applied.

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Definitions:

Intraday Fluctuations

Variations in the price of stocks, commodities, or indexes within a single trading day, driven by market news, rumors, or trading activities.

Electricity Demand

The total amount of electrical power required by consumers and businesses at any given time.

Operating Costs

Expenses associated with the day-to-day functioning of a business, such as wages, rent, and utilities.

Alternative Sources

Different or non-traditional means or options available for achieving a specific goal, typically referring to energy, materials, or information.