The application of the lower of cost or market rule to inventory valuation is an example of a. the revenue realization principle b. the going concern assumption c. special industry practices d. conservatism

The application of the lower of cost or market rule to inventory valuation is an example of a. the revenue realization principle b. the going concern assumption c. special industry practices d. conservatism

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 7MC: Which accounting rule serves as the primary basis for the lower-of-cost-or-market methodology for...

See similar textbooks

Related questions

Q: Under what circumstances is the relative sales value an appropriate basis for determining the price…

Q: Changing the method of inventory valuation should be reported in the financial statements under what…

A: Inventory- A manufacturing company's inventory is a critical current asset. Inventory refers to the…

Q: Which one of the following sets of inventory cost flow assumptions is not susceptible to profit…

A: FIFO and average cost methods are considered as the sets of inventory cost flow assumptions that are…

Q: Which of the following is not an inventory method/cost flow assumption? O a. First-in, first-out O…

A: 5 methods for inventory cost are below: The retail inventory method. The specific identification…

Q: Lower of cost and net realizable value a. results in the lowest valuation if applied to the total…

A: It is preferable to value the inventory at lower of cost or net realizable value (LCNRV) in…

Q: "Market" is defined in the "Lower-of-cost-or-market" rule required to account for FIFO inventory as:…

A: Inventory- Inventory refers to the items which business kept on hand in order to make the money, it…

Q: Should inventory be measured initially at its market value or at cost?

A: Accounting: Accounting is a system, or a process of collecting and organizing economic…

Q: Why does Target feel that the retail inventory method will result in inventory beingvalued at the…

A: LCM (Lower of Cost or Market) approach: It is an approach that values the inventory at historical…

Q: Which of the following is not a disadvantage of the LIFO inventory cost flow assumption? a. The…

A: LIFO is the Last in first out method of inventory which says that inventory purchased last should be…

Q: Explain how the inventory cost flow assumption that was utilized might have an impact on liquidity…

A: Inventory Cost Flow Assumptions refer to the many ways for determining the cost of inventory sold…

Q: Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule…

A: The rule of valuing the inventory at cost or net realizable value is also called as Prudence concept…

Q: O and LIFO inventory management?

A: The method an organization uses to assess their inventory prices can have an effect on their…

Q: For valuation of inventory, the lower of cost or market rule may be applied to a. the total…

A: Inventory of the business should be valued by choosing appropriate method. Lower of cost of market…

Q: Discuss the effect of absorption and marginal costing on inventory valuation and profit…

A: Absorption costing also written as full costing. Under this method, all costs are considered in…

Q: Which inventory valuation model serves as a middle-of-the-road approach for taxes and income? a.…

A: Under the FIFO and LIFO, the obtained cost of goods sold can be higher or lower than the actual…

Q: Briefly explain the usefulness of the inventory figure resulting from the application of lower of…

A: Net Realizable Value(NRV) refers to the inventory value which a business entity can realize from…

Q: Demonstrate how the inventory cost flow assumption utilized might have an impact on liquidity…

A: Inventory cost flow assumptions refers to the way in which costs are removed from inventory and…

Q: Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or…

A: LCNRV (Lower of Cost or Net Realizable Value) approach: It is an approach that compares the cost…

Q: 1. Inventory should be stated at (a) Lower of cost and fair value. (b) Lower of cost and net…

A: Inventory means the stock of goods in which the businessmen deals. Inventory is to be valued as per…

Q: Which of the following is not utilized by lenders to control inventory that is being used in…

A: Trust receipts are not utilised by lenders.

Q: The most common approach to implementing the lower of cost or market rule for inventory valuation is…

A: Inventory means the stock of goods in which the businessmen deals. Inventory is always valued at…

Q: Inventory should be measured at lower of fair value and net realizable value of the inventory.

A: The IAS 2 suggests the requirement for the reporting of the inventories. This states that the…

Q: What does an “upstream” sale of inventory refer to and when is the profit recognized?

A: Upstream sale of inventory: When a subsidiary sells goods to a parent company, is referred as…

Q: What is the potential impact of differences in areas such as inventory valuation of unilever united…

Q: Explain the lower of cost or market rule for inventory valuation and explain why it is GAAP.

A: Lower of cost or market value for inventory valuation is just a mixture of many accounting…

Q: Which U.S. GAAP principle or rule would apply if the net realizable value of acompany’s inventory is…

A: Net realizable value: Net realizable value is the net amount of receivables which a business expects…

Q: Explain briefly the application of the LCM rule to ending inventory. Describe its effect on the…

Q: What method of inventory valuation should be used for economic decision-making problems?

A: Inventory valuation is necessary for ascertaining the accurate cost of inventory so that accurate…

Q: Which inventory cost flow assumption does IFRS not allow? a. Specific identification. b. FIFO. c.…

A: Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: What is the measurement value of inventory? Select one: a. Expected Value b. Fair Value c.…

A: Inventory are the goods which the businesses held for the sale.

Q: FIFO, Average cost, and LIFO are often used for inventory valuation purposes. Compare these methods…

A: Comparison between FIFO, Average Cost, and LIFO: FIFO: The first-in, first-out (FIFO) accounting…

Q: Why does reporting income under generally accepted accounting principles “reward building inventory…

A: Generally Accepted Accounting Principles: The Generally Accepted Accounting Principles are a group…

Q: What is the dollar-value method of LIFO inventory valuation?What advantage does the dollar-value…

Q: Which of the following statements is true regarding the lower of cost or net-realizable value (NRV)?…

A: Inventory means the stock of goods in which the businessmen deals. Every company wants to maintain…

Q: Discuss the primary differences between U.S. GAAP and IFRS with respect to the lower of cost or net…

Question

The application of the lower of cost or market rule to inventory valuation is an example of

a. the revenue realization principle

b. the going concern assumption

c. special industry practices

d. conservatism

Definition Definition Accounting practice that allows a business to determine the monetary value of any unsold inventory.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Why must support service costs be assigned to products for purposes of inventory valuation?
Which one of the following sets of inventory cost flow assumptions is not susceptible to profit manipulation by management? a. FIFO and specific identification b. LIFO and average cost c. FIFO and average cost d. LIFO and specific identification
Explain the lower of cost or market rule for inventory valuation and explain why it is GAAP.
Explain how cost information differs for profit measurement/inventory valuation requirements compared with decision-making requirements.
For valuation of inventory, the lower of cost or market rule may be applied to a. the total inventory b. each item or the total inventory c. each item, the total of inventory, or major categories of inventory
Explain how liquidity measures can be influenced by the inventory cost flow assumption used.
What is the difference between FIFO and LIFO inventory management?
Changing the method of inventory valuation should be reported in the financial statements under what enhancing quality of accounting information?A. TimelinessB. VerifiabilityC. ComparabilityD. Understandability
The taxable income of Jenny for first week of January 2021 was R3 220. She did not earn overtime pay or any other remuneration. Her weekly pension deduction was R280. Her other deductions amounted to R800. Which one of the following statements is true? Select one: O A. Her contribution to the pension fund was 8% of her normal pay. O B. Her net wage was R2 140. O C. Her gross wage was R4 300. D. Her gross wage for January 2021 was higher than her basic wage.
the lower cost or market is a method of inventory valuation true or false?
In current cost financial statements: a. General price level gains or losses are recognized b. Amounts are always statement in common purchasing power c. All items are different from what they would be in a historical cost statement of financial position. d. Holding gains are recognized
Which inventory valuation model serves as a middle-of-the-road approach for taxes and income? a. First-in, First-out b. Specific-unit-cost c. Average-cost d. Last-in, First-out