You are still the accountant for Tejada Company which is in its first year of business/operation and you have made the appropriate recommendation to your Vice President (VP) of Accounting to use either First-in-First-Out (FIFO) or Last-in-First-Out (LIFO) cost flow assumption to value the companys inventories.

Therefore, your inventories are currently reflected at the appropriate LIFO or FIFO cost on the companys Balance Sheet.

You have decided and recommended to your VP of Accounting that the company should use the Lower-of-Cost-or-Market Rule (LCM) to appropriately value your inventories on its Balance Sheet. You should NOT consider the LCNRV (Lower-of-Cost-or-Net-Realizable-Value Method) as part of your answer.

Given what you have read and our discussions in class of Chapter 9 about the LCM Rule, provide a well-reasoned and detailed explanation how you would go about explaining the application of the LCM rule to the VP. Provide specific examples and/or assumptions as to what is entail in the application of this rule, as well as any financial statements implication it would have to the company.