When a Company Uses the Perpetual Inventory Method,which of the Following

question 48

Multiple Choice

When a company uses the perpetual inventory method,which of the following would be the entry to adjust inventory to lower-of-cost-or-market?

• A) debit Loss on Inventory and credit Merchandise Inventory
• B) debit Merchandise Inventory and credit Inventory Adjustment
• C) debit Cost of Goods Sold and credit Merchandise Inventory
• D) debit Merchandise Inventory and credit Cost of Goods Sold

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Definitions:

Adjusted Book Value

The book value of a company after adjustments have been made for assets and liabilities that may be overvalued or undervalued.

Investment Account

A financial account held by an investor with a brokerage or financial institution, primarily used for holding stocks, bonds, mutual funds, and other securities.

Previously Unissued Shares

Shares that are authorized by a corporation's charter but have not been issued or sold to investors.

Consolidated Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, including the cash flows of the parent company and its subsidiaries.