5. The major criticism of the lower of cost or market rule for valuation of inventory is that a holding losses are recognized, but holding gains are not b. holding gains are recognized, but holding losses are not c. the total difference between selling price and cost is usually recognized in the period of the sale d. the conservatism principle is violated because of the use of the floor constraint 6. The Denver Company uses the gross profit method to estimate its inventory in interim financial statements. The markup on cost is 40%. The following information is available: January 1, 2021, inventory balance $12,500 Purchases 25,000 Sales during January 21.000 The estimated inventory at January 31, 2021. is a $22.500 b. $25.900 c. $16,500 d. 516,100 Code: 7. Consider the following: A Gross Profit to Net Sales Ratio B = Gross Profit to Cost of Goods Sold Ratio Which equation is correct? 1 b. B-1A A c. B1-A 1+A 8. The lower of cost or market rule for inventory valuation can be used in conjunction with the retail inventory method in which of the following inventory cost flow assumptions: FIFO LIFO Average Cost a. No b. Yes Yes d Yes No Yes No Yes Yes No Yes Yes