The situation that requires a departure from the cost basis of accounting to the lower of cost or market basis in valuing inventory is necessitated by
A) a decline in the value of the inventory.
B) an increase in selling price.
C) an increase in the value of the inventory.
D) a desire for more profit.

Question

Quizplus · Accepted Answer

When the value of inventory declines below its cost, the lower of cost or market rule is applied to ensure that inventory is not overstated on the financial statements.

The Situation That Requires a Departure from the Cost Basis