Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest number of inventory write-downs?
A)Each individual inventory item
B)Average of cost of goods sold for the past three years
C)Major classes or categories of inventory
D)The entire stock of inventory in the aggregate

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market rule can be applied to (1)each individual inventory item, (2)major classes or categories of inventory,or (3)the entire stock of inventory in the aggregate.When a company applies the lower-of-cost-or-market rule to the entire stock of inventory in the aggregate,items that have market values that are higher than cost will cancel out others that have market values that are lower than cost,resulting in fewer write-downs.

Which of the Following Methods of Applying the Lower-Of-Cost-Or-Market Rule