Probes,Inc.wrote down its inventory to the lower replacement value.The effect on Probes' accounting equation includes a(n):
A)increase in assets.
B)decrease in assets.
C)increase in liabilities.
D)increase in stockholders' equity.

Question

Quizplus · Accepted Answer

The entry to record the write-down includes a debit to Cost of Goods Sold (to increase that expense account).The increase in expenses decreases net income,which,in turn,decreases total stockholders' equity.The entry also includes and a credit to Inventory (to decrease that asset account).