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:

Licensed to Sell

The authorization given to individuals or companies to engage in the selling of certain products or services.

Antitrust Lawsuit

A legal action taken against parties alleged to have violated antitrust laws, aimed at promoting competition and preventing monopolies.

Resale Price Maintenance

A practice where a manufacturer and its distributors agree on the selling prices of the products to end customers.

Predatory Pricing

A strategy whereby a dominant company temporarily reduces prices to a level that is unprofitable for competitors in order to drive them out of the market.