Inventory: The Lower-of-Cost-or-Market Rule

This lesson discusses the lower-of-cost-or-market rule that sometimes requires the book value of inventory to be reduced to its market value. Before taking this lesson, you should already be familiar with the basic accounting rules that govern inventory. Another lesson, Inventory and the Cost of Goods Sold, covers those basic concepts.

Learning Outcomes

On completion of the lesson, the student will be able to:

1. Define the lower-of-cost-or-market rule.
2. Explain the meaning of "market" in the lower-of-cost-or-market rule..
3. Demonstrate how to apply the lower-of-cost-or-market rule.