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Financial & Managerial Accounting
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Short Answer

What is the meaning of market as it is used in determining the lower of cost or market for inventory?

Market in LCM method of inventory valuation refers to the market value of the inventory.

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Step by Step Solution

Definition of Historical Cost

The initial cost incurred by the business for the acquisition of the asset is known as its historical cost. Such cost is used for reporting the line items of the balance sheet.

Meaning of market in determination of lower cost or market value of inventory

Under lower cost and market method of determining the inventory value, market refers to the cost at which inventory can be replaced or the market value of the inventory. Under this method, the inventory is reported either on its actual cost or market value, whichever is lower.

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