Question

What is meant by "market" in the lower-of-cost-or-market rule? Multiple Choice The amount of gross margin earned by selling merchandise. The amount the goods were sold for during the period. The amount that would have to be paid to replace the merchandise. The amount originally paid for the merchandise.

Answer 1

The correct answer is C

Step-by-step explanation:

The market is defined or referred to as the replacement cost (which is present or current) of the inventory or merchandise, as long the market prices will not exceed the net realizable value.

This rules states that the business need to record the inventory or merchandise cost at whichever cost is lower or low, the current market price or the original cost of the inventory.

So, the market is defined as the amount which would be paid in order to replace the merchandise or inventory.