If year-end inventory is reduced from cost to a lower net realizable value, which of the following accurately depicts the results?

Question

Quizplus · Accepted Answer

When year-end inventory is reduced from cost to a lower net realizable value, the cost of goods sold is increased by the same amount. This is because the reduction in inventory value is recorded as an expense in the income statement, which increases the cost of goods sold. Additionally, the beginning inventory of the next period is decreased by the same amount because the ending inventory of the current period becomes the beginning inventory of the next period. Therefore, the correct answer is Choice B.

If Year-End Inventory Is Reduced from Cost to a Lower