Week 4 DQ3

Why do generally accepted accounting principles require the use of lower of cost or market in valuing inventory? What are the three different inventory cost flow assumptions commonly used in commerce today and allowed by generally accepted accounting principles? How does a company determine what cost flow assumption they should use?

The reason behind understanding value of inventory at a point in time is to accurately report what the value of the inventory (asset) is for a company. If the asset of a company is worth less than what the market is willing to pay for it than the company will not make money on selling those goods. Also, knowing the price the inventory was purchased at compared to what the market price is currently is important to state what amount of value...