If a firm is using the lower-of-cost-or-market rule and if a write-down entry is required, which of the following effects will apply?
A)Net income will increase.
B)Gross margin will decrease.
C)Assets will be unaffected.
D)Liabilities will increase.

Question

Quizplus · Accepted Answer

A write-down entry resulting from applying the lower-of-cost-or-market rule increases cost of goods sold, which decreases gross margin, and decreases inventory.

If a Firm Is Using the Lower-Of-Cost-Or-Market Rule and If