Which of the Following Statements Relating to the Lower of Cost

question 15

Multiple Choice

Which of the following statements relating to the lower of cost and net realisable value rule is incorrect?

• A) The rule is based on the accounting principle of prudence (conservatism).
• B) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs.
• C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be.
• D) The rule is applied separately to each item of inventory or to each group of inventory.

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Definitions:

Wardrobe Engineering

The strategic planning and selection of clothing and accessories to enhance an individual’s appearance for personal or professional purposes.

First Impression

The initial judgment or feeling one has about someone or something upon first encounter.

Handshake

A traditional gesture of greeting, agreement, or parting, where two people grasp and shake each other's hand.

Facial Expression

Non-verbal communication through movements of the facial muscles, conveying emotions or reactions without words.