What Effect Would an Adjustment to Record Inventory at the Lower

question 21

Multiple Choice

What effect would an adjustment to record inventory at the lower of cost and net realizable value have on the company's financial statements?

• A)An increase to assets.
• B)An increase to stockholders' equity.
• C)A decrease to revenue.
• D)An increase to expense.

---

Definitions:

Debits

Accounting entries that increase assets or expenses and decrease liabilities, equity, or revenue.

Credits

Entries that increase liabilities, revenues, or equity, or decrease assets or expenses in accounting.

Transferring

The process of moving items, such as data, assets, or inventory, from one location or account to another.

Ledger Accounts

Individual records within the general ledger that show the transactions and balances for each accounting period, relating to specific assets, liabilities, equity, revenues, and expenses.