During the First Quarter, a Company's Application of Lower of Cost

question 42

Multiple Choice

During the first quarter, a company's application of lower of cost or market methods indicated a $150,000 loss from a temporary market decline, which is expected to be restored in the fiscal year.During the second quarter, the market reversed the decline.Which of the following situations indicates a proper treatment of these facts?

• A)​A $37,500 loss recognized in the first quarter and no recovery recognized in the second quarter.
• B)​A $150,000 loss recognized in the first quarter and a $90,000 recovery in the second quarter.
• C)​A $150,000 loss recognized in the first quarter and a $50,000 recovery in the second quarter.
• D)​No loss recognized in the first quarter and no recovery recognized in the second quarter.

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Definitions:

Debt Capacity

The ability to borrow to increase firm value.

Financial Planning

A comprehensive evaluation and strategy development for an individual's or organization’s financial future, including investments, insurance, savings, and budget management.

Working Capital Decision

Decision making related to managing a company's current assets and liabilities to ensure operational efficiency and financial stability.

Capital Budgeting

The process businesses use to evaluate potential major projects or investments, assessing the value they may add to the company.