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Assume a company paid $800 for a computer that it plans to sell to its customers. Suppose that because of new technology the company could buy the same computer today for $600. How would the lower-of-cost-or-market rule affect the financial statements

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Answer:

Debit $200-COGS

Credit$200-Inventory

Explanation:

If a company use to sell computers for $800 and now they can repurchase them for $600, there is a journal accounting entry in the cost of goods sold and inventory accounts. In the above scenario, the journal entry will be $200 debit in cost of goods sold account and a credit of $200 in the inventory account.

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