When the Direct Method Is Used to Record Inventory at Market

question 52

Multiple Choice

When the direct method is used to record inventory at market

• A)there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale.
• B)a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline.
• C)only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements.
• D)the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.

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Definitions:

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Principal government agency concerned with helping small U.S. firms.

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