Abel Company Must Write-Down Its Inventory by $30,000 to the Net

question 25

Multiple Choice

Abel Company must write-down its inventory by $30,000 to the net realizable value of $450,000 at December 31, 2016. What is the effect of this writedown on the year 2016 financial statements?

• A)Decrease cost of goods sold.
• B)Decrease ending inventory on the balance sheet.
• C)Increase pretax income.
• D)Decrease accounts payable.

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Definitions:

Market Demand Curve

A graphical representation that shows the relationship between the price of a good and the total quantity demanded by all consumers in the market.

Barrier To Entry

Factors that make it difficult for new firms to enter a market, such as high initial costs or stringent regulations.

Video Game Console

A video game console is a specialized computer system designed for interactive video gaming, often connected to a television or other display.

Network Externalities

The effect that an additional user of a good or service has on the value of that product to others, often leading to a positive feedback loop.