Asked by Janninah Miller on May 22, 2024
Verified
The lower-of-cost-or-market basis of valuing inventories is an example of
A) comparability.
B) the historical cost principle.
C) conservatism.
D) consistency.
Lower-of-cost-or-market
An accounting principle that valuables inventory at the lower cost between the original purchase cost and its current market price.
Conservatism
An accounting principle that requires uncertainties and risks to be accounted for by reporting lower potential profits and higher liabilities.
- Analyze and utilize the lower-of-cost-or-market principle across diverse inventory techniques.
Verified Answer
BD
Bhavin DholakiaMay 24, 2024
Final Answer :
C
Explanation :
The lower-of-cost-or-market basis of valuing inventories is an example of conservatism, which requires accountants to recognize losses and liabilities as soon as possible, even if there is no evidence of realization. It requires companies to provide for all possible losses but not anticipate gains.
Learning Objectives
- Analyze and utilize the lower-of-cost-or-market principle across diverse inventory techniques.