Flower Company had beginning inventory of $19,000, purchases were $100,000, and ending inventory had a cost of $25,000 and a market value of $20,000 . Which of the following is/are not true?
a. Cost of Goods Sold is $5,000 larger when the firm records ending inventory at lower of cost or market than when it records the inventory at acquisition cost.
b. The loss of $5,000 increases Cost of Goods Sold by $5,000 and therefore reduces net income by $5,000, compared to the acquisition cost basis.
c. The firm should disclose the existence of large write-downs included in Cost of Goods Sold in the notes so that users of financial statements understand the components of the Cost of Goods Sold account.
d. The firm should disclose the existence of large write-downs included in Cost of Goods Sold in Managements' Discussion and Analysis so that users of financial statements understand the scope of the asset impairment.
e. none of the above
D
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