Nelson Corporation is required to record an inventory write-down of $2,500 as a result of using the lower-of-cost-or-market rule.Which of the following shows how this business event would affect the financial statements?

Question

Quizplus · Accepted Answer

The business event will decrease assets (inventory) and stockholders' equity (retained earnings). It increases expenses [cost of goods sold (if material) or operating expenses (if immaterial)], which decreases net income. It does not affect the statement of cash flows.

Nelson Corporation Is Required to Record an Inventory Write-Down of $2,500