In applying the lower of cost or market for tax purposes the

In applying the lower of cost or market for tax purposes, the market price is the replacement cost of the goods, rather than their expected selling price.

True or false?

Solution

Answer is: \"TRUE\"

In lower of cost or market for valuation of inventories, the market stands for replacement cost of the goods, rather than the net realisable value or the expected selling price. Because expected selling price is based on more of judgement, rather than less of predictable cost of completion, disposal or transportation. The replacement value is more technically sound way of valuing in the books.