The Lower-Of-Cost-Or-Market Value (LCM)rule ________

question 69

Multiple Choice

The lower-of-cost-or-market value (LCM) rule ________.

• A) replaces the use of specific identification, FIFO, LIFO, or weighted-average inventory costing methods.
• B) violates the conservatism principle
• C) requires that merchandise inventory be reported in the financial statements at the lower of the historical cost or the selling price of the inventory
• D) is an accounting issue separate from applying an inventory costing method

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Definitions:

Preemptive Rights

Rights that allow shareholders to purchase additional shares in a company before the company offers them to the public, protecting their ownership percentage from dilution.

Transferability

The ability of an asset or property right to be sold or otherwise transferred from one party to another.

Watered Stock

Shares issued by a company at a value much greater than its asset worth, inflating its apparent value without actual backing.

Fair Market Value

An estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.