Application of the lower-of-cost-or-market rule results in inconsistency because a company may value inventory at cost in one year and at market in the next year.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market rule requires a company to value inventory at either cost or market value, whichever is lower. This means that the valuation of inventory can change from year to year depending on the market conditions. As a result, application of this rule can result in inconsistency in the valuation of inventory.

Application of the Lower-Of-Cost-Or-Market Rule Results in Inconsistency Because a Company