Inventory with a value of $300 000 was written down to $250 000 in June 2016 because of falling prices in the industry.This transaction will:
A) decrease assets,profit and shareholders' equity.
B) decrease assets and profit,but not shareholders' equity.
C) decrease assets and shareholders' equity but not profit.
D) decrease assets and decrease shareholders' equity.

Question

Quizplus · Accepted Answer

The write-down of inventory from $300,000 to $250,000 decreases assets (inventory value) and profit (due to the loss recognized from the write-down), which in turn decreases shareholders' equity (as retained earnings, part of equity, decrease with the loss).

Inventory with a Value of $300 000 Was Written Down