When the Lower of Cost or Market (LCM)rule Requires an Inventory

question 155

Multiple Choice

When the lower of cost or market (LCM) rule requires an inventory adjustment:

• A)the adjustment usually,but not always,reduces the book value of inventory.
• B)the write-down is usually reported as a part of cost of goods sold.
• C)the inventory adjustment is recorded in a contra-account called merchandise allowances.
• D)the write-down does not affect any of the financial statements.

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Definitions:

Arithmetic Sequence

A sequence of numbers in which the difference between consecutive terms is constant.

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The sum of the first n terms of a sequence, often used in the context of series.

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Accountant

A professional who performs accounting functions such as audits or financial statement analysis, and is responsible for keeping and interpreting financial records.