The Logic Behind the Lower-Of-Cost-Or-Market Rule Is

question 61

Multiple Choice

The logic behind the lower-of-cost-or-market rule is:

• A)Inventory gradually becomes obsolete.
• B)Inventory that is unsalable should be written down to zero (or its scrap value).
• C)An asset is not worth more than it would cost the owner to replace it.
• D)Inventory that is unsalable should be written down to its replacement cost.

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Definitions:

Articles Of Incorporation

Legal documents filed with a governmental body to legally document the creation of a corporation.

Shares

Portions of ownership in a corporation.

Date Of Record

A specific date set by a company on which the shareholders of record are entitled to receive a dividend or other distribution.

Dividend

A payment made by a corporation to its shareholders, usually derived from profits.