Explain the lower of cost or market or lower of cost or net realizable value concept.

Inventory should be reported at the original cost paid and not what it can be sold for in the market.

Inventory should be reported at its original cost if the replacement market value $($cost$)$ is less.

Inventory should be adjusted downward if the inventory value is lower than inventory cost.

Inventory should be adjusted downward if the inventory value is higher than inventory cost.