Inventories: Special Valuation Issues MULTIPLE CHOICE 1. The application of the lower of cost or market rule to inventory valuation is an example of a. the revenue realization principle b. the going concern assumption c. special industry practices d. Conservatism 2. For valuation of inventory, the lower of cost or market rule may be applied to a. the total inventory b. each item or the total of inventory c. each item, the total of inventory, or major categories of inventory d. each item 3. The most common approach to implementing the lower of cost or market rule for inventory valuation is to apply it a. separately to each item of inventory b. to each major category of inventory c. to the total inventory d. in a combination of the above methods 4. $ Given the following information for the Network Company: Date Cost Market December 31, 2018 $ 800 800 December 31, 2019 1,000 940 December 31, 2020 1,100 1,060 If the allowance method of recording lower of cost or market is in use, which December 31, 2020 entry is not correct? a. Loss Due to Market Valuation 40 Allowance to Reduce Inventory to Market 40 b. Allowance to Reduce Inventory to Market 20 Loss Recovery Due to Market Valuation 20 C. Inventory 1,100 Income Summary 1, 100 d. Income Summary 1,000 Inventory 1,000