Which of the Following Statements Does Not Accurately Describe the Lower

question 94

Multiple Choice

Which of the following statements does not accurately describe the lower of cost or market (LCM) valuation method?

• A) The journal entry to write-down inventory decreases gross profit.
• B) The journal entry to write-down inventory decreases current assets.
• C)The journal entry to write-down inventory does not affect pretax income.
• D)The journal entry to write-down inventory increases cost of goods solD.The journal entry increases cost of goods sold and therefore decreases gross profit and pretax income. The journal entry also decreases inventory.

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Definitions:

Product U4

Product U4 is a designated name for a specific product, possibly indicating its position or type within a wider range of products offered by a company or manufacturer.

Traditional Costing

A costing methodology that assigns overhead costs to products based on a predetermined rate, often using direct labor hours as the allocation base.

Activity-Based Costing

Activity-Based Costing is a method of allocating overhead to specific products or services based on the activities that contribute to overhead costs.

Overhead Cost

The ongoing, general business expenses not directly tied to producing goods or services but necessary for running the business.