12. Which of the following regarding the lower of cost or market rule for inventory are true?

(1) The lower of cost or market rule is an example of the historical cost principle.

(2) When the market value (net realizable value) of inventory drops below the cost shown in the financial records, net income is not affected.

(3) When the market value (net realizable value) of inventory drops below the cost shown in the financial records, total assets (total net book value) are reduced.

a. (1)

b. (2)

c. (3)

d. (1) and (3)

e. All of the three