Asked by Demario Green on Jul 05, 2024
Verified
In general, it is argued that the lower of cost or market rule is supported most closely by which of the following theoretical assumptions?
A) revenue recognition
B) conservatism
C) historical cost
D) going concern
Theoretical Assumptions
Foundational ideas or principles assumed to be true without immediate empirical testing, used as the basis for further theory development or analysis.
Conservatism
An accounting principle that advises to exercise caution and report expenses and liabilities as soon as possible, but to delay the recognition of revenues and assets.
- Acquire knowledge of the foundational theory and logic supporting the LCM rule, along with the principle of conservatism.
Verified Answer
AE
Aliea EdnieJul 09, 2024
Final Answer :
B
Explanation :
The lower of cost or market rule is a conservative approach to valuation, as it requires companies to value their inventory at the lower of its cost or current market value. This approach aligns with the conservatism assumption in accounting, which suggests that businesses should anticipate and recognize losses in a more timely manner than gains. Therefore, the correct answer is B) conservatism.
Learning Objectives
- Acquire knowledge of the foundational theory and logic supporting the LCM rule, along with the principle of conservatism.
Related questions
Which One of the Following Statements Is True with Regard ...
Generally, Valuing Inventory Above Cost ...
What Were the Central Tenets of the New Conservatism? What ...
The Fact That Democratic Party Leaders Have Become More Liberal ...
________ Generally Support Abortion Rights and Oppose State Involvement with ...