1. When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of the term "market"?

a. Net realizable value

b. Net realizable value less a normal profit margin

c. Current replacement cost

d. Discounted present value

2. Designated market value

a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.

b. should always be equal to net realizable value.

c. may sometimes exceed net realizable value.

d. should always be equal to net realizable value less a normal profit margin.

3. Lower-of-cost-or-market

a. is most conservative if applied to the total inventory.

b. is most conservative if applied to major categories of inventory.

c. is most conservative if applied to individual items of inventory.

d. must be applied to major categories for taxes.

4. Which of the following is a characteristic of a perpetual inventory system?

a. Inventory purchases are debited to a Purchases account.

b. Inventory records are not kept for every item.

c. Cost of goods sold is recorded with each sale.

d. Cost of goods sold is determined as the amount of purchases less the change in inventory.