In applying LCM, market cannot be:
A) Less than net realizable value.
B) Greater than the normal profit.
C) Less than the normal profit margin.
D) Greater than net realizable value.

Question

Quizplus · Accepted Answer

In applying the Lower of Cost or Market (LCM) method, the market value cannot be greater than the net realizable value (NRV). The LCM method is used to value inventory at the lower of its historical cost or its current market value, where the market value is typically limited to an amount that does not exceed the net realizable value. This ensures that inventory is not overstated on the balance sheet.

In Applying LCM, Market Cannot Be