At the end of the 2013 accounting period DeFazio Company determined that the market value of its inventory was $39,900. The historical cost of this inventory was $40,700. DeFazio uses the perpetual inventory method. The entry necessary to reduce the inventory to the lower of cost or market will

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The write-down will decrease assets (inventory) and increase expenses (cost of goods sold), which decreases net income.

At the End of the 2013 Accounting Period DeFazio Company