Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31, 2016 using the lower of cost or market (LCM) valuation method?
A)The 2016 gross profit decreases.
B)The 2017 cost of goods sold is effectively decreased if the inventory is sold during 2017.
C)The 2016 ending inventory is decreased.
D)The 2017 gross profit is not affected if the inventory is sold during 2017.

Question

Quizplus · Accepted Answer

A write-down of inventory using LCM reduces the value of inventory on the balance sheet and decreases the gross profit in the period in which it is recorded. However, if the inventory is sold in the subsequent period, the reduced cost basis will lower the cost of goods sold and increase the gross profit in that period, therefore D is not accurate. A, B, and C are accurate statements.

Which of the Following Statements Does Not Accurately Describe the Effects