What effect would an adjustment to record inventory at the lower-of-cost-or-market have on the company's financial statements?

Question

Quizplus · Accepted Answer

An adjustment to record inventory at the lower-of-cost-or-market would result in an increase to expense, specifically cost of goods sold. This adjustment reflects a decrease in the value of the inventory, which decreases the company's net income and, in turn, may decrease stockholders' equity if net income was reduced below the amount of any dividends paid. There would be no effect on assets or revenue.

What Effect Would an Adjustment to Record Inventory at the Lower-Of-Cost-Or-Market