If the Market Value of Goods in Inventory Falls to $26,000

Multiple Choice

If the market value of goods in inventory falls to $26,000 below its cost, the company should:

A) do nothing, because assets are reported at their original purchase price.
B) credit inventory for $26,000.
C) debit inventory for $26,000 and credit accrued liabilities for $26,000.
D) use the weighted average cost method since that method provides a more accurate indicator of current value. The LCM rule requires a write-down of inventory when its replacement cost falls below its cost.