Asked by Ronnie
When you apply the lower- of- cost- or market rule, market values generally refers to. which one
current sales
FIFO
LIFO
current replacement
current sales
FIFO
LIFO
current replacement
Answers
Answered by
MathMate
The Lower-of-Cost or Market rule (LCM) is used report the value of inventory.
For goods that increase in cost with time, inventory is reported using the actual price paid.
It is possible that the market value falls below the actual price paid, so that inventory could be replaced at a lower cost. In this case, the LCM rule requires that the inventory be reported according to the <i>current replacement</i> cost.
See:
http://en.wikipedia.org/wiki/Lower_of_Cost_or_Market
For goods that increase in cost with time, inventory is reported using the actual price paid.
It is possible that the market value falls below the actual price paid, so that inventory could be replaced at a lower cost. In this case, the LCM rule requires that the inventory be reported according to the <i>current replacement</i> cost.
See:
http://en.wikipedia.org/wiki/Lower_of_Cost_or_Market
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