In applying the lower of cost or market method to inventory valuation,market is defined as:
A)Historical cost.
B)Current replacement cost.
C)Current sales price.
D)FIFO.
E)LIFO.

Question

Quizplus · Accepted Answer

The market value is defined as the current replacement cost in the lower of cost or market method of inventory valuation. This means that if the market value (current replacement cost) of inventory is lower than its cost, the inventory should be valued at the market value. This helps to avoid overstating the value of inventory on the balance sheet. Historical cost (A) is the original cost of purchasing the inventory, while current sales price (C) is what the inventory could be sold for at a given point in time. FIFO (D) and LIFO (E) refer to inventory costing methods and are not directly relevant to the lower of cost or market method.

In Applying the Lower of Cost or Market Method to Inventory