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Which of the statements below are true about lcm? (check all that apply.)
a. LCM allows companies to recognize a gain in value of an asset in the period the gain occurs. b. Assets are not shown at an inflated value on the balance sheet, but rather at lower of cost or replacement cost. c. LCM allows companies to recognize a loss in value of an asset in the period the loss occurs. d. Companies never want to report in- ventory on a balance sheet that is higher than replacement cost.



Answer :

Option D. Companies cannot report inventory on a balance sheet that is higher than the replacement cost, is the true statement about lcm.

LCM lets organizations understand a loss in the fee of an asset within the length of the loss that takes place.

The decrease of cost or market (LCM) technique states that once valuing an agency's stock, it's far recorded on the balance sheet at both the historic fee and the marketplace fee. ancient fee refers to the value at which the stock becomes purchased. The fee of an excellent can shift through the years.

The inventory turnover ratio assesses how quickly an agency Is promoting Its products, in order that it may generate cash to pay debts. The stock turnover ratio assesses the enterprise's ability to generate a make the most of the income of Its stock.

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QUESTION:

Which of the statements below are true about LCM? (Check all that apply.)

ANSWER:

  • When market value is lower than cost, a loss is recorded.
  • A decline in market value means a loss in value of inventory.
  • Market value is used as the replacement cost when using the LIFO method.

Incorrect:

When market value is higher than cost, a gain is recorded.

Reason: Gains are not recognized until the asset is sold, and it will be included in the profit of the sale.

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