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What is the purpose of the lower of cost or market method

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1. 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? 

Reference no: EM131117871

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