Which one of the following statements is true with regard to the lower of cost or market rule?
A) If the direct method is used in applying the lower of cost or market rule, the loss or loss recovery due to market valuation changes is included in cost of goods sold.
B) The lower of cost or market rule must be applied on an individual item basis for financial accounting purposes.
C) With the application of the lower of cost or market rule using the direct method, the account, Allowance to Reduce Inventory to Market, is reported on the balance sheet as a contra asset.
D) The lower of cost or market rule is primarily an application of the going concern assumption.
A
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