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

Multiple Choice

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

• Management should instead compare the inventorys cost to an estimate of its selling price in the next year.

• Managements policy is acceptable.

• Management should instead report inventory at the lower of cost or market value based on replacement cost.