Lower of Cost and Net Realizable Value Applies to the Write-Down

question 103

Multiple Choice

Lower of cost and net realizable value applies to the write-down of inventory values when market value exceeds cost.Why does this rule not allow for write-ups in inventory value?

• A) Write-ups in inventory value are more uncertain than write-downs.
• B) The most prudent approach to preparing financial statements involves avoidance of pessimistic projections.
• C) Writing up inventory to market value would be inconsistent with the conservatism principle.
• D) Write-ups in inventory value are inconsistent with the matching principle.

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