If a Company Is Using the Lower-Of-Cost-Or-Market Rule and a Write-Down

question 7

Multiple Choice

If a company is using the lower-of-cost-or-market rule and a write-down is required,how will that write-down affect the elements of the company's financial statements?

• A)Net income will increase.
• B)Gross margin will decrease.
• C)Total assets will decrease.
• D)Gross margin and total assets will both decrease.

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Definitions:

Value Neutrality

The principle of remaining unbiased and detached when conducting research or making evaluations, avoiding personal judgment based on one's own values.

Belief

An acceptance that something exists or is true, especially one without proof.

Utilitarianism

An ethical theory that posits the best action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Consequentialist Theory

A moral theory that judges the rightness or wrongness of actions based solely on their outcomes or consequences.