Which of the Following Is True Regarding the Application of Lower-Of-Cost-Or-Market

question 57

Multiple Choice

Which of the following is true regarding the application of lower-of-cost-or-market method under international accounting standards?

• A) No lower-of-cost-or-market rule for inventory exists under international accounting standards.
• B) Inventory is recorded at the lower-of-cost-or-market value (defined as replacement cost of the inventory).
• C) Inventory is recorded at the lower-of-cost-or-market value defined as net-realizable value.
• D) Inventory is recorded at the lower-of-cost-or-market value defined as net-realizable value,minus the normal profit margin.

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Definitions:

Raw Materials Used

The basic substances in their natural, modified, or semi-processed state used as inputs for production.

Average Inventory

The mean value of inventory within a certain period, calculated by adding the beginning inventory and ending inventory and dividing by two.

Direct Labor

The labor cost directly associated with the production of goods, including wages for workers who physically convert materials into the finished product.

Raw Materials

The basic materials from which products are made, typically not yet processed or used in manufacturing.