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AccountingCornerstones of Financial AccountingWhich of the following statements regarding the lower of cost or market (LCM) rule is true? a. The LCM rule is an application of the historical cost principle. b. When the net realizable value of inventory drops below the historical cost of inventory, an adjustment is made to decrease inventory to its market value and decrease income. c. If a company uses the LCM rule, there is no need to use a cost flow assumption such as FIFO, LIFO, or average cost. d. When the net realizable value of inventory is above the historical cost of inventory, an adjustment is made to increase inventory to its market value and increase income.
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Which of the following statements regarding the lower of cost or market (LCM) rule is true? a. The LCM rule is an application of the historical cost principle. b. When the net realizable value of inventory drops below the historical cost of inventory, an adjustment is made to decrease inventory to its market value and decrease income. c. If a company uses the LCM rule, there is no need to use a cost flow assumption such as FIFO, LIFO, or average cost. d. When the net realizable value of inventory is above the historical cost of inventory, an adjustment is made to increase inventory to its market value and increase income.

BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881
BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

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Chapter 6, Problem 11MCQ
Textbook Problem

Which of the following statements regarding the lower of cost or market (LCM) rule is true?

a. The LCM rule is an application of the historical cost principle.

b. When the net realizable value of inventory drops below the historical cost of inventory, an adjustment is made to decrease inventory to its market value and decrease income.

c. If a company uses the LCM rule, there is no need to use a cost flow assumption such as FIFO, LIFO, or average cost.

d. When the net realizable value of inventory is above the historical cost of inventory, an adjustment is made to increase inventory to its market value and increase income.

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Chapter 6 Solutions

Cornerstones of Financial Accounting
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