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Financial
Chapter 9
4
Accounting
Undergraduate 3
10/14/2010
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Term
Using the lower-of-cost-or-market method
 Definition

  1. Define pertinent values: historical cost, floor, replacement cost, ceiling
  2. Determine "market"
  3. Compare cost with market and select the lower amount
Term
Floor value
 Definition
(Selling price - normal selling cost) - Normal profit
Term
ceiling value
 Definition
Selling price - normal selling costs
Term
Market value
 Definition
the replacement cost (unless it is below the floor value, in which case the floor value is the market value)
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