Which of the following concerning the “lower-of-cost-or-market” rule is not true? 

1. If the replacement cost of an inventory item falls below its historical cost, the value of the item should be written down.

 2. If the market value of an item exceeds its historical cost, it should be written up and a gain should be recorded. 

3. It is possible for an item’s net realizable value to fall below its historical cost. 

4. Lower-of-cost-or-market is an example of the conservatism principle.