Answer:
D) Original cost.
Explanation:
When the company uses the lower of cost or market method, it should assign value to its inventory by calculating the middle figure between replacement cost or net realizable value, and net realizable value - normal profit.
In this case, the market value must be either the replacement cost or the net realizable value, but both values are the highest. Since the original cost is below the market value, but above the net realizable value - normal profit, the inventory must be valued at the original cost.
Do not record transactions that do not affect inventory quality. A recorded inventory transaction has actually taken place.
Records of inventory purchases made during the accounting period. The purchase account is increased by direct debit. The manufacturing costs of the goods sold are overestimated by the same amount. An overstatement of cost of goods sold will result in an understatement of net income and retained earnings by the original margin of error.
If the auditor is dissatisfied with the accuracy of the closing balance sheet and may be materially increase.
Inventory write-downs affect both the income statement and the balance sheet. Write-offs are treated as expenses. This means your net income and tax liability will be reduced. Therefore, a decrease in net income will reduce a company's retained earnings and reduce shareholders' equity on the balance sheet.
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Based on the scenario above, the economic concept which Frakie is faced with is OPPORTUNITY COST. Opportunity cost refers to a benefit or value that a person could have received but which he gave up in order to take another course of action. Thus, an opportunity cost represents an alternative given up when a decision is made.
