Which of the following statements is incorrect regarding the lower-of-cost-or-market rule?

It can increase future income if the expected reductions do not materialize.

It usually understates assets.

It incorporates both gains and losses in value that occur during the course of business.

It is inconsistent because losses are recognized but not gains.

If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is

net realizable value less a normal profit margin.

market value.

net realizable value.

original cost.