When the market value of inventory drops below the cost recorded in the financial records,applying the lower of cost or market/net realizable value (LCM/NRV)rule causes:

Question

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The effect of a write-down on the accounting equation is a decrease in Inventory,an asset,and an increase in Cost of Goods Sold,an expense.An increase in Cost of Goods Sold results in a decrease in gross profit and a decrease in net income.

When the Market Value of Inventory Drops Below the Cost