For companies that use LIFO, inventory is valued at the lower of cost or net realizable value at the end of the reporting period.

Question

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Under LIFO (Last In, First Out), inventory is valued at cost, but the principle of lower of cost or market (LCM) can be applied, where market refers to current replacement cost, not necessarily net realizable value. The rule primarily ensures that inventory is not reported at an amount greater than the benefits it can provide.

For Companies That Use LIFO, Inventory Is Valued at the Lower