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

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 higher than inventory

cost$.$

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

$cost.$

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

the market.