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 entry would affect the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question

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 entry would affect the financial statements?

A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

The entry to record the write-down 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