Why Are Inventories Reported at the Lower of Cost and Market

question 31

Multiple Choice

Why are inventories reported at the lower of cost and market?

• A)Neutrality.
• B)Matching.
• C)Conservatism (prudence).
• D)Comparability.

Distinguish between debt and equity financing.

Identify various lending practices and their implications.

Understand the concept of quadratic functions and their graphs.

Calculate the vertex of a quadratic function.

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Definitions:

Fair Market Value

The estimated price at which an asset or service would exchange hands between a willing buyer and seller, both having reasonable knowledge of the relevant facts.

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a bond or stock certificate.

Common Stock

A type of security representing ownership in a corporation, with holders having a claim on part of the company’s assets and earnings.

Dividends

Payments made by a corporation to its shareholder members, usually as a distribution of profits.