Asked by Ishmail Mgwena on Jun 13, 2024
Verified
Under the LCM approach the market value is defined as
A) FIFO cost.
B) LIFO cost.
C) current replacement cost.
D) selling price.
LCM Approach
The Lower of Cost or Market method, an accounting principle requiring inventory to be recorded at either its historical cost or market value, whichever is lower, to reflect potential losses.
Market Value
An estimation of the price at which an asset or company could be bought or sold in a current market.
- Comprehend the fundamentals of the lower-of-cost-or-market rule in the valuation of inventory.
Verified Answer
ZQ
Zachary QureshiJun 15, 2024
Final Answer :
C
Explanation :
The LCM approach values inventory at the lower of its cost or current replacement cost. Therefore, the market value is defined as the current replacement cost, not FIFO cost, LIFO cost, or selling price.
Learning Objectives
- Comprehend the fundamentals of the lower-of-cost-or-market rule in the valuation of inventory.
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