Which of the following concerning the “lower of cost or market” rule is not true

Question

Which of the following concerning the “lower of cost or market” rule is not true? a. If the replacement cost of an inventory item falls below its historical cost, the value of the item should be written down. b. If the market value of an item exceeds its historical cost, it should be written up and a gain recorded. c. It is possible for an item’s net realizable value to fall below its historical cost. d. Application of lower of cost or market is an example of the practice of conservatism in accounting.

Explanation / Answer

If the market value of an item exceeds its historical cost, it should be written up and a gain recorded is not true

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