You have been asked by the financial vice president to develop a short presentation on the lower-of-cost-or-market

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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.


Instructions

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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Related Book For  answer-question

Intermediate Accounting principles and analysis

ISBN: 978-0471737933

2nd Edition

Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso

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