The holding loss incurred from applying the LCM rule to inventory is:
A)not reflected on the balance sheet.
B)an adjustment to cost of goods sold.
C)not reflected on the income statement.
D)not considered a permanent loss.

Question

Quizplus · Accepted Answer

The holding loss incurred from applying the LCM rule to inventory is an adjustment to cost of goods sold, as it represents a reduction in the value of inventory that ultimately affects the cost of goods sold calculation. The adjustment is reflected on the income statement, not the balance sheet, and is considered a permanent loss as it represents a decrease in the value of the company's assets.

The Holding Loss Incurred from Applying the LCM Rule to Inventory