Asked by Demario Green on Jul 05, 2024

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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.
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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.