Ask Question
22 January, 05:12

What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory?

a. Prevents understatement of the inventory value.

b. Allows for a normal profit to be earned.

c. Allows for items to be valued at replacement cost.

d. Prevents overstatement of the value of obsolete or damaged inventories.

+1
Answers (1)
  1. 22 January, 06:23
    0
    The correct answer is letter "D": Prevents overstatement of the value of obsolete or damaged inventories.

    Explanation:

    The lower-of-cost-or-market method values assets according to the lowest value possible choosing between the market value or the asset's historical cost. This accounting principle is useful to avoid exaggerating the value of obsolete or damaged assets the firm might have in stock.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory? a. Prevents understatement of the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers