Part A:
Many companies use the lower-of-cost-or-market to value inventory. They compare the current value of their inventory with its historical cost and adjust the value, if necessary, to ensure the inventory is booked at the lower of the two values. Argue why inventories are valued using the "lower of cost or market" method. Evaluate at least two arguments.
Part B:
The retail inventory method is an alternative used by many large retailers for costing inventory. Describe how the retail inventory method is calculated. Compare the different versions of the retail inventory method and indicate when a company might use each of the different alternative versions. Describe any weaknesses with the retail inventory method. Why?