When a Portion of Inventories Has Been Pledged as Security

question 69

Multiple Choice

When a portion of inventories has been pledged as security on a loan,

• A) the value of the portion pledged should be subtracted from the debt.
• B) an equal amount of retained earnings should be appropriated.
• C) the fact should be disclosed but the amount of current assets should not be affected.
• D) the cost of the pledged inventories should be transferred from current assets to noncurrent assets.

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