When Inventories Are Written Down Due to the Application of the Lower

question 206

Multiple Choice

When inventories are written down due to the application of the lower of cost or market (LCM) rule, which of the following is usually increased?

• A)cost of goods sold
• B)inventories
• C)operating expenses
• D)accumulated depreciation--inventory

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Definitions:

Dividends

Disbursements from a company to its owners, typically representing a share of the earnings.

Short-term Speculation

Financial transactions or investments made with the expectation of significant returns in a short period, often characterized by high risk.

Available-for-sale Debt Portfolio

Debt securities that are not classified as held-to-maturity or trading securities, and can be sold in response to needs for liquidity or changes in interest rates.

Unrealized Loss

A loss that results from holding onto an asset that has decreased in value, but has not yet been sold or liquidated.