When the Replacement Cost of Inventory Drops Below the Cost

question 114

Multiple Choice

When the replacement cost of inventory drops below the cost recorded in the financial records,applying the lower of cost or market (LCM) rule causes:

• A)a decrease in cost of goods sold.
• B)no change in net income,other things being equal.
• C)a reduction in the book value of total assets.
• D)an increase in net income.

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Definitions:

Actualize

The process of realizing or achieving one's potential or abilities, often associated with the fulfillment of personal goals or self-improvement.

Interpretation

The process of explaining the meaning of something, especially in the context of data, texts, dreams, or behaviors.

Psychoanalysis

A set of psychological theories and therapeutic methods which aim to treat mental disorders by investigating the interaction of conscious and unconscious elements in the mind and bringing repressed fears and conflicts into the conscious mind by techniques such as dream interpretation and free association.

Behaviorism

A theory of learning based on the idea that all behaviors are acquired through conditioning, emphasizing the role of environmental factors in shaping behaviors.