At the end of a reporting period,Gamble Corporation determines that its ending inventory has a cost of $300,000 and a market value of $230,000.What would be the effect(s)of the adjustment to write down inventory to market value?

Question

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The adjustment to write down inventory to market value would result in a decrease in total assets (option A) and a decrease in net income (option B) because the cost of inventory is now higher than its market value. This would reduce the value of inventory reported on the balance sheet and also result in a lower cost of goods sold on the income statement, reducing net income. However, the adjustment would not affect retained earnings (option C) directly.

At the End of a Reporting Period,Gamble Corporation Determines That