The Journal Entry to Write-Down Inventory Under the Lower of Cost

question 98

True/False

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a decrease in both ending inventory and cost of goods sold.

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Definitions:

Excess Reserves

The capital reserves held by a bank or financial institution in excess of what is required by regulators, central bank, or other financial authority.

Actual Reserves

The total reserves held by a bank, consisting of both required reserves and any excess reserves not needed to meet central bank requirements.

Discount Rate

The Discount Rate is the interest rate set by central banks at which financial institutions can borrow reserves, influencing monetary policy and the money supply.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulation of banks, and providing financial services to depository institutions.