Question

The lower of cost or market approach is Blank______ for companies that use Blank______. Multiple choice question. required under GAAP; LIFO or the retail inventory optional under GAAP; LIFO or the retail inventory optional under GAAP; any method of inventory valuation

Answer 1

The lower cost or market approach is (C) required under GAAP for companies that use  LIFO or retail inventory.

What is market approach?

• The market approach is a method of evaluating an asset's worth based on the selling price of comparable assets.
• Along with the cost technique and discounted cash-flow analysis, it is one of three main valuation methodologies (DCF).

• Companies that use LIFO or retail inventory are obligated by GAAP to use the lower cost or market method.
• A realtor, for example, can gather information on comparable real estate sales in close vicinity to a client's property and modify those values to account for differences in land area and building square footage to arrive at a market-based valuation for the targeted property.

Therefore, the lower cost or market approach is (C) required under GAAP for companies that use  LIFO or retail inventory.

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The complete question is given below:

The lower cost or market approach is _____ for companies that use _____.

a. optional under GAAP; LIFO or the retail inventory

b. optional under GAAP; any method of inventory valuation

c. required under GAAP; LIFO or the retail inventory

d. required under GAAP; any method of inventory valuation