How Should the Following Costs Affect a Retailer's Inventory Valuation

question 20

Short Answer

How should the following costs affect a retailer's inventory valuation? $\begin{array}{lcc} & \text { Freight-in } & \text { Interest on Inventory Loan } \\\text { a. } & \text { Increase } & \text { No effect } \\b.&\text { Increase } & \text { Increase } \\ c.&\text { No effect } & \text { Increase } \\d.&\text { No effect } & \text { No effect }\end{array}$

---

Definitions:

Preferred Dividends

Dividends that are paid out to preferred shareholders at a fixed rate before any dividends are paid to common shareholders.

Common Dividends

Payments made to shareholders out of a corporation's earnings, reflecting the portion allocated to holders of common shares.

Liquidation

The process of converting assets into cash, often during the winding down of a business or the selling off of stock.

Preferred Stock

Preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shareholders typically receive dividends before common shareholders.