When Comparing the Lower of Cost to Market

question 83

Multiple Choice

When comparing the lower of cost to market

• A)the appropriate market value is determined before comparing it to the cost
• B)the purpose of the ceiling is to ensure that the write-down is sufficient to cover all expected gains
• C)the purpose of the floor is to prevent an excessive gain from being recognized in the future
• D)the process is consistent with the principle of conservatism because the goal is to limit excessive swings in gross margin

---

Definitions:

Factor Endowments

The quantity and quality of labor, land, and capital that a country possesses and can utilize for manufacturing.

Free Trade

A policy wherein a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports).

Tariffs

Government levies on goods brought into the country.

Import Quotas

Import Quotas are government-imposed limits on the quantity or value of goods that can be imported into a country, typically used to protect domestic industries and control trade balances.