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

question 13

Multiple Choice

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

• A) Accumulated Depreciation-Inventory
• B) Inventories
• C) Loss on Decline in Inventory Value
• D) Cost of Goods Sold

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Definitions:

Safe Harbor

A provision in a law or regulation that provides protection from liability or penalty under specific situations or conditions.

Corporate Manager

An individual responsible for leading, directing, and overseeing the operations and strategy of a corporation.

Insider Trading

Using inside information to either cheat the corporation or take unfair advantage of corporate outsiders.

Material

The substance or substances from which a thing is or can be made, often used in contexts involving physical objects or the fabric of physical, tangible items.