A company has inventory with a historical cost of \$150,000 and a market value of \$140,000. What should the company do according to the rule of conservatism?

• A. Record the inventory at \$150,000 and wait for market recovery
• B. Record the inventory at \$150,000 and ignore market value
• C. Record the inventory at \$140,000 and ignore the loss
• D. Record the inventory at \$140,000 and recognize a loss

Answer: (D)