Under the lower of cost and net realizable value basis, the adjusting entry to record a decline in net realizable value below cost includes a
A)debit to the Inventory account.
B)debit to the Cost of Goods Sold account.
C)credit to the Cost of Goods Sold account.
D)credit to the Sales account.

Question

Quizplus · Accepted Answer

When the net realizable value of inventory falls below its cost, an adjusting entry is made to recognize this decline. This is done by debiting the Cost of Goods Sold account, which reflects the loss in value as an expense, thereby reducing net income.

Under the Lower of Cost and Net Realizable Value Basis