Assume a company paid $800 for a computer that it plans to sell to its customers....

Assume a company paid $800 for a computer that it plans to sell to its customers. Suppose that because of new technology the company could buy the same computer today for $600. How would the lower-of-cost of market rule affect the financial statements?

Multiple Choice

Decrease net income on the income statement

Decrease common stock reported on the balance sheet

Increase liabilities on the balance sheet

Increase stockholders’ equity on the balance sheet

Solutions

Expert Solution

Correct answer--- Decrease net income on the income statement

Writing down of inventory to market price when market price is lower than cost a debit for expense is made to record loss in inventory value. Simultaneously Inventory value decreases. The recognition of loss of inventory will reduce the income since expense will be increased.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

103. A computer company salesperson invites the IT managers of its top 10 customers (in terms...

103. A computer company salesperson invites the IT managers of its top 10 customers (in terms of dollar sales) to view a demonstration of the firm's new product line, so the salesperson can obtain their opinions regarding various options and configurations that could be offered. These IT managers are most likely to be the __________ of their organizations' buying centers. users reciprocity arrangers gatekeepers buyers influencers 105 is/are responsible for establishing the organization's mission and objectives. Other organizations Suppliers Senior...

Gravity, Inc., needs to raise $46.5 million to fund its expansion plans. The company will sell...

Gravity, Inc., needs to raise $46.5 million to fund its expansion plans. The company will sell shares at a price of $27.70 in a general cash offer and the company's underwriters will charge a spread of 7 percent. How many shares need to be sold?

company has variable costs of $34.50, total fixed costs of $21,700,000 and plans to sell its...

company has variable costs of $34.50, total fixed costs of $21,700,000 and plans to sell its product for $45.00. In 2018 it sold 2,400,000 units of product. Required: e) what is the operating leverage in 2018; f) the production manager wants to automate production and lower variable costs by $3 per unit and spend an additional $4,500,000 fixed costs per year- is this more profitable? g) The sales manager wants to drop prices by $2.50 per unit and spend an...

Question 5 ABC Company plans to sell 100,000 units of its single product X, in a...

Question 5 ABC Company plans to sell 100,000 units of its single product X, in a period at a selling price of $15 per unit. Fixed overheads and net profit for the period are expected to be $440,000 and $520,000 respectively using the existing production process. The company is considering a change to its production process. The change would increase the fixed overheads to $700,000 in the period and reduce the variable costs to $3.5 per unit. The selling price...

TPO, an IP telephony company, offers various combinations of handsets and usage plans to its customers...

TPO, an IP telephony company, offers various combinations of handsets and usage plans to its customers under two-year non-cancelable contracts. It offers two handset models: a basic model that it offers free of charge (stand-alone selling price is $150); and the most recent model, which offers additional features and functionalities and for which TPO charges $300 (stand-alone selling price is $600). The entity also offers two usage plans: a 500-minute plan and an 1000- minute plan. The 500-minute plan sells...

Pasti Berhad values advertise and sell residential property on behalf of its customers. The company has...

Pasti Berhad values advertise and sell residential property on behalf of its customers. The company has been in business for only a short time and is preparing a cash budget for the first four months of the year 2020. The expected sales of residential properties are as follows. Year 2019 2020 2020 2020 2020 Month December January February March April Units Sold 10 10 15 25 30 The average price of each property is RM180,000 and Pasti Berhad charges a...

Ivanhoe Inc. operates a retail computer store. To improve its delivery services to customers, the company...

Ivanhoe Inc. operates a retail computer store. To improve its delivery services to customers, the company purchased four new trucks on April 1, 2020. The terms of acquisition for each truck were as follows: 1. Truck #1 had a list price of $27,200 and was acquired for a cash payment of $25,500. 2. Truck #2 had a list price of $28,800 and was acquired for a down payment of $2,100 cash and a non–interest-bearing note with a face amount of...

On October 1, 2021, a company sells $800 of gift cards to customers. The gift cards...

On October 1, 2021, a company sells $800 of gift cards to customers. The gift cards expire one year from the date of sale. By October 1, 2022, $750 of the gift cards have been redeemed and the sales recorded at the time of redemption. What entry, if any, should the company record on October 1, 2022? A) Debit Sales Revenue, $50; credit Cash, $50. B) Debit Cash, $750; credit Sales Revenue, $750. C) Debit Deferred Revenue, $50; credit Sales...

For customers with a particular phone company, the amount that is paid monthly (in dollars) is...

For customers with a particular phone company, the amount that is paid monthly (in dollars) is normally distributed, with a mean of 83 and a standard deviation of 2.75. Find the value k such that 80% of all customers pay less than k dollars per month. Select the closest to your answer. options: 85.5 85.3 85.2 85.0 85.4 85.1

Marvelly company manufactures and sells dolls. The company plans to manufacture and sell 80,000 units of...

Marvelly company manufactures and sells dolls. The company plans to manufacture and sell 80,000 units of the dolls for $4,000,000 in 2020 with the following information: The cost for each doll consists of direct material $15, direct labour $10, and variable manufacturing overhead $5. The salaries of the factory manager and supervisors are estimated at $300,000 per annum, depreciation of machinery, factory equipment, and buildings is budgeted at $250,000 per year, and the rental of factory building is $200,000 per...

Subjects