The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item-by-item basis, by major classification of inventory, or by the total inventory.

Question

Quizplus · Accepted Answer

This statement is true. The lower-of-cost-or-market method can be applied on an item-by-item basis, by major classification of inventory (such as finished goods, work in progress, or raw materials), or by the total inventory. The method compares the cost of each item or group of items in inventory to its current replacement cost, and the inventory is valued at the lower of these two amounts.

The Lower-Of-Cost-Or-Market Method of Determining the Value of Ending Inventory