Abel Company Must Write Down Its Inventory by $30,000 to the Net

question 58

Multiple Choice

Abel Company must write down its inventory by $30,000 to the net realizable value of $450,000 at December 31,2019.What is the effect of this write-down on the year 2019 financial statements?

• A)Decrease cost of goods sold.
• B)Decrease ending inventory on the balance sheet.
• C)Increase pretax income.
• D)Decrease accounts payable.

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Definitions:

Decreased Dramatically

A significant reduction or drop in quantity or frequency.

Internal Failure Cost

Costs associated with defects found before the product is delivered to the customer, part of Quality Costs.

External Failure Cost

Costs incurred when a product fails to meet quality standards after being delivered to the customer, including returns, repairs, and warranty claims.

Appraisal Cost

The cost associated with evaluating or inspecting products or materials to ensure they meet the necessary quality standards.