Identify the Statement Relating to the Lower of Cost and Net

question 57

Multiple Choice

Identify the statement relating to the lower of cost and net realisable value rule that is untrue.

• A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs.
• B) The rule is based on the accounting principle of prudence (conservatism).
• 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 groups of inventory.

---

Definitions:

Outsourcing

The practice of hiring third parties to perform services or create goods that traditionally were performed in-house by the company's own employees and staff.

Offshoring

The practice of relocating a company's business process, such as manufacturing or services, to another country, often to reduce costs.

Insource

The practice of assigning tasks or projects to individuals or departments within a company rather than to external entities.

IT Applications

Software applications that are designed to help individuals or businesses execute specific tasks or functions using information technology.