Which of the Following Methods of Applying the Lower-Of-Cost-Or-Market Rule

question 65

Multiple Choice

Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest number of inventory write-downs?

• A)Each individual inventory item
• B)Average of cost of goods sold for the past three years
• C)Major classes or categories of inventory
• D)The entire stock of inventory in the aggregate

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Definitions:

Outstanding Shares

The total number of shares of stock that have been issued and are currently held by investors, including public shareholders and company insiders.

Cash Dividends

Payments made by a corporation to its shareholders from profits in the form of cash.

Journal Entries

The recording of financial transactions into the general ledger, detailing the accounts affected, amounts, and dates, which forms the basis of the accounting system.

Trading Securities

Financial instruments bought and held primarily for selling them in the short term to profit from their price changes, recorded as current assets on the balance sheet.