1) Explain the lower of cost or market method of evaluating inventory. Give an example of when LCM would be used. What is meant by the assertion that LCM is an example of the principle of conservatism? Explain.

2) What is the service life on an asset? How do we determine the service life of an asset under straight line and activity based depreciation? Give an example of how a business might determine the service life under straight line and activity based depreciation for an asset they just purchased.