Lower-of-Cost-or-Market you have been asked by the financial vice president to develop a short presentation on the

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Lower-of-Cost-or-Market you have been asked by the financial vice president to develop a short presentation on the lower-of-cost-or-market method for inventory purposes. The financial VP needs to explain this method to the president, because it appears that a portion of the company’s inventory has declined in value. The financial VP asks you to answer the following questions.

(a) What is the purpose of the lower-of-cost-or-market method?

(b) What is meant by “market”?

(c) Do you apply the lower-of-cost-or-market method to each individual item, to a category, or to the total of the inventory? Explain.

(d) What are the potential disadvantages of the lower-of-cost-or-market method?

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a The purpose of using the lowerofcostormarket method is to reflect the decline of inventory value below its original cost A departure from cost is justified on the basis that a loss of utility should ...View the full answer

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Related Book For book-img-for-question

Intermediate Accounting

ISBN: 978-0470423684

13th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield

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Question Posted: Feb 19, 2011 02:24 AM

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Lower-of-Cost-or-Market you have been asked by the financial vice president to develop a short presentation on the

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a The purpose of using the lowerofcostormarket method is to reflect the decline of inventory value below its original cost A departure from cost is justified on the basis that a loss of utility should ...View the full answer

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