Tyler Company incurred an inventory loss due to a decline in market prices during its first quarter of operations in 20X8.At the end of the first quarter,management of the company believed the decline in market prices to be permanent.In the second quarter,the market prices of Tyler's inventories increased above their acquisition cost.Market prices remained higher than acquisition cost during the remainder of 20X8.How should Tyler report the facts above on its first and second quarter income statements?
A)Option A
B)Option B
C)Option C
D)Option D

Question

Quizplus · Accepted Answer

Tyler should recognize the inventory loss in the first quarter income statement as the decline was considered permanent. In the second quarter, the inventory should not be written up to market value, as GAAP does not allow for the reversal of inventory write-downs.

Tyler Company Incurred an Inventory Loss Due to a Decline