When inventories are written down due to the application of the lower-of-cost-or-market (LCM)rule,the account that is usually increased is
A)Cost of Goods Sold.
B)Inventories.
C)Loss on Decline in Value of Inventory.
D)Accumulated Depreciation-Inventory.

Question

Quizplus · Accepted Answer

When inventories are written down due to the application of the lower-of-cost-or-market (LCM) rule, the loss on decline in value of inventory account is usually increased to account for the reduction in value of the inventory. This is in accordance with the principle of conservatism, where losses are recognized as soon as they are anticipated, while gains are recognized only when realized. Therefore, the correct answer is C) Loss on Decline in Value of Inventory.

When Inventories Are Written Down Due to the Application of the Lower-Of-Cost-Or-Market