Question: 1. Explain the lower-of-cost-or-market method of reporting inventory.
2. How is cost determined under the lower-of-cost-or-market method? How is market value determined for this purpose?
3. Describe the entry to adjust from cost to market for inventory write-downs. What effects does this adjustment have on
(a) assets,
(b) liabilities,
(c) stockholders' equity (or retained earnings),
(d) revenues,
(e) expenses,
(f) net income?