Use the following information to answer questions 70-71.
Pal Distributers Inc. values its inventory on an LCM basis. The following data came from the 2020 inventory, which consisted of two items:
-When applying the LCM, the following is true:
A) the inventory account remains at its original value.
B) a contra account to inventory is used.
C) COGS rises when ending inventory is reduced to market value.
D) LCM can only be applied to individual items.

Question

Use the following information to answer questions 70-71.
Pal Distributers Inc. values its inventory on an LCM basis. The following data came from the 2020 inventory, which consisted of two items: 
-When applying the LCM, the following is true:
A) the inventory account remains at its original value. 
B) a contra account to inventory is used. 
C) COGS rises when ending inventory is reduced to market value. 
D) LCM can only be applied to individual items.

Quizplus · Accepted Answer

When ending inventory is reduced to market value under the lower of cost or market (LCM) rule, the cost of goods sold (COGS) increases because the reduction in inventory value is recognized as an expense.

Use the Following Information to Answer Questions 70-71