At the end of its first year of business, Payless, Inc had Sales of $800,000 and Cost of goods sold of $500,000 prior to a lower-of-cost-or-market write down
Payless reported its inventory at the lower market value of $90,000 instead of the cost of $100,000. The adjusting entry to record the write down included a decrease to Inventory and Cost of goods sold.
Required: Put an X in the appropriate box to show the effect of lower-of-cost-or-market write down:
Increase Decrease Remain the same
1. Inventory turnover
2. Gross profit ratio
3. Current ratio
What will be an ideal response?
Increase Decrease Remain the same
1. Inventory turnover X
2. Gross profit ratio X
3. Current ratio X
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