Management has adopted a policy of reporting its unsold inventory at the end of each year at the lower of LIFO cost or the estimated selling price of that inventory in the next year. Which of the following statements is correct?

Multiple Choice:

1) Management should instead report inventory at the lower of cost or the most recent selling price in the current year.

2) Managements policy is acceptable.

3) Management should instead choose the higher of the two amounts to report inventory.

4) Management also needs to consider the inventorys replacement cost.