Question

At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjustment to write down inventory to net realizable value?

Decrease in net income.Increase in net income.Increase in cost of ending inventory.No effect on net income or ending inventory.

Answer 1

Answer: Decrease in net income.

Step-by-step explanation:

Inventory is to be stated at cost or net realisable value which ever is lower and this is what applied to this example been valued at net realizable value.

The reduction in the value of inventory will lead to a decrease in net income since inventory is an asset.

Written off inventory Will not increase net asset income nor ending inventory but it will have a negative

, effect on net income