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

Adjusting inventory at the lower-of-cost-or-market means that the company is recognizing a loss in the value of its inventory. This results in an increase to the Cost of Goods Sold (COGS) expense account, which decreases net income and ultimately decreases stockholders' equity. There is no effect on assets or revenue as inventory is already recorded as an asset and revenue is recognized separately from inventory.

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