The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?
A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs.
B) The rule is based on the accounting principle of conservatism (prudence).
C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be.
D) The rule is applied separately to each item of inventory or to groups of inventory items.

Question

Quizplus · Accepted Answer

The lower of cost and net realisable value rule does not result in a higher gross profit, as it requires inventory to be written down to its lower of cost and net realisable value, which reduces the gross profit.

The Statement Relating to the Lower of Cost and Net