Under the direct method, the unrealized losses that result from the application of the LCM rule are often hidden in the:
A)selling expense.
B)inventory account.
C)cost of goods sold.
D)loss due to market decline of inventory.

Question

Quizplus · Accepted Answer

Under the direct method, the unrealized losses resulting from the application of the Lower of Cost or Market (LCM) rule are often recorded in the cost of goods sold. This is because when inventory is written down to its market value, the loss is recognized through the cost of goods sold when the inventory is eventually sold, rather than being immediately recognized as a separate loss.

Under the Direct Method, the Unrealized Losses That Result from the Application