Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.
Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true?
a.The LCNRV rule is an application of the cost principle.
b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income.
c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost.
d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.
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