The Situation That Requires a Departure from the Cost Basis

question 153

Multiple Choice

The situation that requires a departure from the cost basis of accounting to the lower of cost or market basis in valuing inventory is necessitated by

• A) a decline in the value of the inventory.
• B) an increase in selling price.
• C) an increase in the value of the inventory.
• D) a desire for more profit.

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Definitions:

Compounded Monthly

Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.

Amortization Schedule

A table detailing each periodic payment on a loan over time, breaking down the amounts going towards principal and interest.

Loan to Value Ratio

A financial term employed by lenders that denotes the ratio between a loan amount and the value of an asset acquired.

Down Payment

An initial payment made when something is bought on credit.