Tyler Company incurred an inventory loss due to a decline in market prices during its first quarter of operations in 2008.At the end of the first quarter,management of the company believed the decline in market prices to be permanent.In the second quarter,the market prices of Tyler's inventories increased above their acquisition cost.Market prices remained higher than acquisition cost during the remainder of 2008.How should Tyler report the facts above on its first and second quarter income statements?
A)Option A
B)Option B
C)Option C
D)Option D

Question

Quizplus · Accepted Answer

The loss should be recognized in the first quarter because the decline in market prices was believed to be permanent at that time. The subsequent increase in market prices in the second quarter should not be recognized as income.

Tyler Company Incurred an Inventory Loss Due to a Decline