Which statement concerning lower of cost or market (LCM) is incorrect? Under the LCM basis, market does not apply because assets are always recorded and maintained at cost. The LCM basis uses current replacement cost because a decline in this cost usually leads to a decline in the selling price of the inventory item. LCM is applied after one of the cost flow assumptions has been applied. LCM is an example of a company choosing the accounting method that will be least likely to overstate assets and income.

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Business

Drew Wright

21 March, 19:12

Which statement concerning lower of cost or market (LCM) is incorrect? Under the LCM basis, market does not apply because assets are always recorded and maintained at cost. The LCM basis uses current replacement cost because a decline in this cost usually leads to a decline in the selling price of the inventory item. LCM is applied after one of the cost flow assumptions has been applied. LCM is an example of a company choosing the accounting method that will be least likely to overstate assets and income.

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Haynes · Answer 1

Options:A. LCM is an example of a company choosing the accounting method that will be least likely to overstate assets and income.

B. Under the LCM basis, market does not apply because assets are always recorded and maintained at cost.

C. The LCM basis uses current replacement cost because a decline in this cost usually leads to a decline in the selling price of the inventory item.

D. LCM is applied after one of the cost flow assumptions has been applied.

Answer:B. Under the LCM basis, market does not apply because assets are always recorded and maintained at cost.

Explanation: Lower cost of market (LCM) is a tenet of the Generally accepted accounting principles (GAAP). LCM (lower cost of. market) it is term used in the field of accounting to describe the cost for a given inventory based on the cost of its purchase as at the time it was purchased.

A company can make use of lower cost of market when trying to avoid overstating its cost and revenue, lower cost of market also considers that there is possibility of price changes when valuing an inventory.