If Year-End Inventory Is Reduced from Cost to a Lower

question 76

Multiple Choice

If year-end inventory is reduced from cost to a lower net realizable value,which of the following accurately depicts the results?

• A) Year-end inventory is reduced and cost of goods sold is reduced by the same amount.
• B) Cost of goods sold is reduced and beginning inventory of the next period is reduced by the same amount.
• C) The capital account balance is increased and beginning inventory of the next period is reduced by the same amount.
• D) Cost of goods sold is increased and beginning inventory of the next period is decreased by the same amount.

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Definitions:

Classifying

The process of systematically arranging business transactions or financial statements' components into categorized groups for analysis and reporting.

Bookkeeping

The recording function of the accounting process.

Accounting

A system that measures the business’s activities in financial terms, provides written reports and financial statements about those activities, and communicates these reports to decision makers and others.

Investors

Individuals or institutions that commit capital with the expectation of receiving financial returns.