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:

General Journal Entry

A record in accounting that notes the debit and credit transactions affecting financial statements.

Cash Register

A machine used in retail for calculating and recording sales transactions and storing money.

Cash Sales

Cash sales refer to transactions where payment is made in cash at the time of sale, without deferral.

Petty Cash Account

A small amount of cash kept on hand for minor or incidental expenses, managed through a specified fund.