Chapter 6 Inventory & Cost of Goods Sold

) Perfect Catering Company's ending inventory was $103,700 at historical cost and $116,500 at current replacement cost. The company uses LIFO. Before consideration of the lower-of-cost-or-market rule, the company's cost of goods sold was $58,000. Following U.S. GAAP, which of the following statements reflect the correct application of the lower-of-cost-or-market rule? A) The Ending Inventory balance will be $103,700, and Cost of Goods Sold will be $58,000. B) The Ending Inventory balance will be $116,500, and Cost of Goods Sold will be $58,000. C) The Ending Inventory balance will be $116,500, and Cost of Goods Sold will be $70,800. D) The Ending Inventory balance will be $116,500, and Cost of Goods Sold will be $45,200.

A

) Under the periodic inventory system, the journal entry to record the cost of ending inventory determined by a physical count is: A) debit Inventory and credit Cost of Goods Sold. B) debit Inventory and credit Sales Revenue. C) debit Purchases and credit Inventory. D) debit Cost of Goods Sold and credit Inventory

A

An error in the ending inventory for the year ended December 31, 2019: A) automatically creates errors in cost of goods sold in the 2019 and 2020 financial statements. B) has no effect on the 2019 financial statements, but will create an error in the 2020 financial statements. C) automatically creates errors in the ending inventory balance in the 2019 and 2020 financial statements. D) affects only the 2019 financial statements.

A

Bayer Company uses the periodic inventory system. Bayer Company sold goods on account with a retail price of $1,400 and a cost of $600. Which journal entry(ies) is(are) prepared? A) debit Accounts Receivable for $1,400 and credit Sales Revenue for $1,400 B) debit Accounts Receivable for $600 and credit Sales Revenue for $600 C) debit Accounts Receivable for $1,400 and credit Sales Revenue for $1,400, debit Cost of Goods Sold for $600 and credit Inventory for $600 D) debit Inventory for $600 and credit Purchases for $600

A

Company A has inventory out on consignment and held for sale by Company B. Which company will include the goods in their inventory? A) Company A B) Company B C) either Company A or Company B D) cannot be determined from the facts

A

In 2019, ending inventory is overstated. What is the effect of the error on net income in 2019 and 2020? A) Net income is overstated in 2019 and understated in 2020. B) Net income is understated in 2019 and overstated in 2020. C) Net income is understated in 2019 and 2020. D) Net income is overstated in 2019 and 2020.

A

Lower-of-cost-or-market requires that LIFO inventory be reported in the financial statements at whichever is lower of: A) historical cost or market value. B) purchase cost or net realizable value. C) purchase cost or historical cost. D) FIFO cost or LIFO cost.

A

Mariah Company has inventory at the end of the year with a historical cost of $73,000. Mariah Company uses the perpetual inventory system. Under the LCM rule, the current replacement cost is $70,600. The company uses LIFO. Under U.S. GAAP, the journal entry to record the write-down to LCM will: A) debit Cost of Goods Sold for $2,400 and credit Inventory for $2,400. B) debit Cost of Goods Sold for $2,400 and credit Purchases for $2,400. C) debit Inventory for $2,400 and credit Cost of Goods Sold for $2,400. D) debit Purchases for $2,400 and credit Cost of Goods Sold for $2,400.

A

Seifert Company uses the periodic inventory system. At the end of the accounting period, on December 31, ending inventory is $18,000 and beginning inventory is $7,000. Purchases for the period are $102,000. Which of the following journal entries did Seifert Company prepare on December 31? A) debit Cost of Goods Sold for $102,000 and credit Purchases for $102,000 B) debit Cost of Goods Sold for $18,000 and credit Inventory for $18,000 C) debit Inventory for $7,000 and credit Cost of Goods Sold for $7,000 D) all of the above

A

Slowinski Corporation reported net income of $465,000 for the current year. After the financial statements had been prepared, it was discovered that ending inventory had been overstated by $25,000 and beginning inventory was understated by $1,000. The correct net income was: A) $439,000. B) $441,000. C) $489,000. D) $491,000.

A

Speedy Corporation reported net income of $465,000 for the current year. After the financial statements had been prepared, it was discovered that ending inventory had been understated by $45,000. If the tax rate is 40%, after the error has been corrected, net income, after tax, will: A) increase by $27,000. B) decrease by $27,000. C) increase by $45,000. D) decrease by $45,000.

A

When inventory costs are decreasing, the LIFO costing method will generally result in: A) a higher gross profit than under FIFO. B) a lower gross profit than under FIFO. C) a lower inventory value than under FIFO. D) the same inventory value as FIFO.

A

When inventory costs are falling, which inventory costing method minimizes the taxes paid? A) FIFO B) LIFO C) average cost D) specific identification

A

Which inventory costing method provides the most current, up-to-date cost of inventory on the balance sheet? A) FIFO B) LIFO C) average cost D) specific identification

A

Which of the following is NOT used to determine the cost of net purchases? A) freight-out B) freight-in C) purchase returns D) purchase discounts

A

) Boston Company sells thirty items for $800 per unit and has a cost of goods sold per unit of $480. The gross profit to be reported for selling 30 items is: A) $320. B) $9,600. C) $14,400. D) $24,000.

B

A LIFO liquidation occurs when ________ fall(s) below the ending inventory quantities in the previous period. A) beginning inventory quantities B) ending inventory quantities C) beginning inventory costs D) ending inventory retail value

B

A company has a beginning inventory of $20,000 and purchases during the year of $140,000. The beginning inventory consisted of 2,000 units and 7,000 units were purchased during the year. The company has 5,000 units left at year-end. Under average-cost, what is Cost of Goods Sold? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.) A) $124,460 B) $71,120 C) $140,000 D) $160,000

B

A company purchased inventory for $1,300 per unit. The company later sold one unit of the inventory for cash of $1,900. Under the perpetual inventory system, which accounts will be debited to record the sale? A) Cash, $1,900; Inventory, $1,300 B) Cash, $1,900; Cost of Goods Sold, $1,300 C) Cash, $1,900; Cost of Goods Sold, $600 D) Cash, $1,900; Inventory, $600

B

For discount retailers such as Walmart, inventory turnover equals: A) sales divided by average inventory. B) cost of goods sold divided by average inventory. C) sales discounts divided by average receivables. D) sales divided by average receivables.

B

How do purchase returns and allowances and purchase discounts affect gross purchases? A) Both are added to purchases. B) Both are subtracted from purchases. C) Purchase returns and allowances are added to purchases; purchase discounts are subtracted from purchases. D) Purchase returns and allowances are subtracted from purchases; purchase discounts are added to purchases.

B

If inventory costs are rising and a company is using LIFO, large purchases of inventory near the end of the year will: A) increase income taxes paid. B) decrease income taxes paid. C) not change the amount of income taxes paid. D) cannot be determined.

B

On July 1, Corrao Company purchased $800 of inventory on account with credit terms of 3/10, net 30. Corrao Company uses the perpetual inventory system. On July 5, Corrao Company paid the amount due. What journal entry did they prepare on July 5? A) debit Accounts Receivable for $800 and credit Cash for $800 B) debit Accounts Payable for $800, credit Inventory for $24 and credit Cash for $776 C) debit Purchase Discount for $24, debit Accounts Payable for $752 and credit Cash for $776 D) debit Accounts Payable for $776 and credit Cash for $776

B

The cost of the inventory that a business has sold to customers is called: A) inventory. B) cost of goods sold. C) purchases. D) gross profit.

B

The inventory turnover ratio: A) is determined by dividing cost of goods sold by net sales. B) shows how many times the company sold its average level of inventory. C) should be high for a company that sells high-end merchandise. D) will be lower for companies that have many low-priced items in their inventory.

B

The journal entry to record the purchase of inventory on account under the periodic inventory system is: A) debit Inventory and credit Accounts Payable. B) debit Purchases and credit Accounts Payable. C) debit Cost of Goods Sold and credit Accounts Payable. D) debit Inventory and credit Cost of Goods Sold

B

The selling price of a television is $1,700 and the cost to the retailer is $725. What is the retailer's gross profit from the sale of the television? A) $0 B) $975 C) $725 D) $1,700

B

To determine the cost of goods sold, to report on the income statement, multiply the number of units of inventory: A) sold times the retail price per unit. B) sold times the cost per unit. C) purchased times the retail price per unit. D) purchased times the cost per unit.

B

Under a perpetual inventory system, the journal entry to record the purchase of inventory on account will include a: A) debit to Inventory and a credit to Cash. B) debit to Inventory and a credit to Accounts Payable. C) debit to Accounts Payable and a credit to Inventory. D) debit to Purchases and a credit to Accounts Payable.

B

Under the ________ method, ending inventory is based on the costs of the most recent purchases. A) average-cost B) FIFO C) LIFO D) specific-identification

B

When inventory costs are increasing, the FIFO costing method will generally yield a cost of goods sold that is: A) higher than cost of goods sold under the LIFO method. B) lower than cost of goods sold under the LIFO method. C) equal to the gross profit under the LIFO method. D) equal to cost of goods sold under the LIFO method.

B

Which inventory costing method provides the most realistic measure of net income? A) FIFO B) LIFO C) average cost D) specific identification

B

Which statement is TRUE? A) Most businesses use the periodic inventory system. B) The excess of sales revenue over cost of goods sold is called gross profit because operating expenses have not yet been subtracted. C) Most companies use the specific identification method. D) Most companies in the United States follow International Financial Reporting Standards.

B

) A company uses LIFO in one year, then switches to FIFO and then to average-cost. This is a violation of the: A) disclosure principle B) historical cost principle. C) consistency principle. D) conservatism principle.

C

A company has a beginning inventory of $50,000 and purchases during the year of $150,000. The beginning inventory consisted of 3,000 units and 8,000 units were purchased during the year. 3,780 units remain in ending inventory. The cost of the ending inventory using the average-cost method will be: (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.) A) $131,260. B) $199,980. C) $68,720. D) $268,700.

C

ABC Furniture Unlimited sells antique furniture. ABC will most likely use the ________ method to cost its ending inventory. A) First-in, first-out B) Last-in, first-out C) Specific identification D) Average

C

Another term for gross profit is: A) gross income. B) gross sales. C) gross margin. D) gross operating income.

C

Beginning inventory for the year ended December 31, 2019, is understated. How will this error affect net income for 2019 and 2020? A) 2019 overstated; 2020 understated B) 2019 understated; 2020 overstated C) 2019 overstated; 2020 no effect D) 2019 understated; 2020 no effect

C

Ending inventory for the year ended December 31, 2019, is understated by $8,000. How will this affect net income for 2019 and 2020? A) Net income will be understated by $8,000 in 2019 and 2020. B) Net income will be overstated by $8,000 in 2019 and 2020. C) Net income will be understated by $8,000 in 2019 and overstated by $8,000 in 2020. D) Net income will be overstated by $8,000 in 2019 and understated by $8,000 in 2020.

C

Grogan Company purchases inventory on account with a cost of $1,700 and a retail price of $3,400. Grogan Company uses the perpetual inventory method. What journal entry is required on the date of purchase? A) debit Purchases for $1,700 and credit Accounts Payable for $1,700 B) debit Purchases for $3,400 and credit Cash for $3,400 C) debit Inventory for $1,700 and credit Accounts Payable for $1,700 D) debit Accounts Receivable for $3,400 and credit Purchases for $3,400

C

If inventory costs are decreasing over time, the income taxes paid using FIFO will ________ the income taxes paid using LIFO. A) exceed B) equal C) be less than D) none of the above

C

In 2019, beginning inventory is overstated. What is the effect of the error on total stockholders' equity in 2020? A) Total stockholders' equity is overstated in 2020. B) Total stockholders' equity is understated in 2020. C) Total stockholders' equity is correctly stated in 2020. D) none of the above.

C

In 2019, ending inventory is overstated. What is the effect of the error on total stockholders' equity in 2019 and 2020? A) Total stockholders' equity is overstated in 2019 and 2020. B) Total stockholders' equity is understated in 2019 and 2020. C) Total stockholders' equity is overstated in 2019 and correctly stated at the end of 2020. D) Total stockholders' equity is overstated in 2019 and understated in 2020.

C

Jaronski Company uses the periodic inventory system. At the end of the accounting period, journal entries are prepared to remove: A) beginning and ending inventory balances. B) purchases only. C) beginning inventory balance and purchases. D) beginning inventory balance, purchases, and ending inventory balance.

C

On August 1, Savage Company purchased $2,100 of inventory on account with credit terms of 4/10, net 30. Savage Company uses the perpetual inventory system. On August 15, Savage Company paid the amount due. What journal entry did they prepare on August 15? A) debit Inventory for $2,100 and credit Accounts Payable for $2,100 B) debit Accounts Payable for $2,100, credit Inventory for $84 and credit Cash for $2,016 C) debit Accounts Payable for $2,100 and credit Cash for $2,100 D) debit Accounts Payable for $2,016 and credit Cash for $2,016

C

Roadway Company purchases inventory from Fedway Company with the shipping terms FOB destination. This means that: A) Roadway Company owns the goods while they are in transit. B) Legal title passes to Roadway Company when the goods leave Fedway's shipping dock. C) Fedway Company will pay the freight on this transaction. D) Roadway Company will include the goods in their inventory as soon as they leave Fedway's shipping dock.

C

Sanfran Company purchased inventory for $110,000. In addition they had purchase returns of $6,000 and paid freight-in of $13,000. Sanfran Company's net cost of purchases would be: A) $91,000. B) $103,000. C) $117,000. D) $129,000.

C

The LIFO Reserve can increase only when: A) inventory costs are stable. B) inventory costs are falling. C) inventory costs are rising. D) the foreign exchange rate is rising.

C

The cost of inventory that is still on hand is called: A) cost of goods sold, an expense that appears on the balance sheet. B) inventory, a long-term asset that appears on the balance sheet. C) inventory, a current asset that appears on the balance sheet. D) purchases, a current asset that appears on the balance sheet.

C

The financial statements of a merchandising company will show: A) the same accounts as the financial statements of a service company. B) gross profit after operating expenses on the income statement. C) inventory as a current asset on the balance sheet. D) cost of goods sold as a contra revenue account on the income statement.

C

The inventory system that uses computer software to keep a running record of inventory on hand is the: A) cost of goods sold inventory system. B) periodic inventory system. C) perpetual inventory system. D) hybrid inventory system.

C

The use of the FIFO method generally increases taxable income: A) when inventory costs are constant. B) when inventory costs are declining. C) when inventory costs are increasing. D) under all circumstances.

C

Two accounts that appear on the financial statements of a merchandising company but are NOT needed by a service company are: A) cost of goods sold and depreciation. B) cost of goods sold and net income. C) cost of goods sold and inventory. D) inventory and depreciation.

C

Under a perpetual inventory system, when a sale is made, the seller needs to prepare: A) no journal entry. B) one journal entry only. C) two journal entries. D) three journal entries.

C

Uptown Department Store uses the perpetual inventory system and has ending inventory with a historical cost of $610,000. The current replacement cost of the inventory is $598,000. The net realizable value is $670,000. The company uses LIFO. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $930,000. Which journal entry is required under U.S. GAAP? A) debit Cost of Goods Sold for $60,000 and credit Inventory for $60,000 B) debit Inventory for $60,000 and credit Cost of Goods Sold for $60,000 C) debit Cost of Goods Sold for $12,000 and credit Inventory for $12,000 D) debit Inventory for $12,000 and credit Cost of Goods Sold for $12,000

C

Using a perpetual inventory system, which journal entry(ies) is(are) prepared when two units of merchandise are sold on account? A) debit Accounts Receivable and credit Sales Revenue only B) debit Cash and credit Sales Revenue; debit Cost of Goods Sold and credit Inventory C) debit Accounts Receivable and credit Sales Revenue; debit Cost of Goods Sold and credit Inventory D) debit Accounts Receivable and credit Sales Revenue; debit Inventory and credit Cost of Goods Sold

C

When inventory is shipped from the seller to the buyer with shipping terms of FOB destination: A) title passes from the seller to the buyer when the goods leave the seller's shipping dock. B) the goods will be included in the inventory of the buyer while in transit. C) the seller has title to the goods while they are in transit. D) the buyer will pay the transportation costs associated with the purchase.

C

) A 30% gross profit percentage means that: A) for each dollar of sales, the company has a cost of goods sold of seventy cents. B) for each dollar of sales, the company has a gross profit of thirty cents. C) for each dollar of sales, the company has a cost of goods sold of thirty cents. D) A and B

D

) A periodic inventory system: A) is used for inexpensive goods. B) is used when inventory cannot be controlled by visual inspection. C) keeps a running record of inventory on hand. D) is used for small, low-value items.

D

) Sales revenue is based on the ________ of the inventory, while cost of goods sold is based on the ________ of the inventory. A) cost; sale price B) cost; fair market value C) sale price; retail price D) sale price; cost

D

) The historical cost of Jahn Company's ending inventory was less than the net realizable value. The company uses FIFO. Following U.S. GAAP, which journal entry is required? A) debit Cost of Goods Sold and credit Sales B) debit Inventory and credit Cost of Goods Sold C) debit Cost of Goods Sold and credit Inventory D) No journal entry is needed.

D

) The lower-of-cost-or-market rule for inventory is based on the accounting principle(s) of: A) relevance. B) representational faithfulness. C) disclosure. D) A and B.

D

) Under the periodic inventory system, which of the following entries is prepared at the end of the accounting period? A) debit Purchases and credit Cost of Goods Sold B) debit Cost of Goods Sold and credit Inventory C) debit Cost of Goods Sold and credit Purchases D) B and C

D

) Which statement is FALSE? A) Many U.S. companies that currently use LIFO for their U.S. operations must use another method if they have operations in foreign countries. B) IFRS does not permit the use of LIFO. C) IFRS does permit the FIFO method. D) If LIFO is no longer allowed to be used in the United States, the tax burden on many companies will be lower.

D

2019, beginning inventory is overstated. What is the effect of the error on net income in 2019 and 2020? A) Net income is overstated in 2019 and 2020. B) Net income is understated in 2019 and 2020. C) Net income is understated in 2019 and overstated in 2020. D) Net income is understated in 2019 and correctly stated in 2020.

D

All of the following costs would be included in the cost of inventory EXCEPT for: A) insurance while in transit from seller. B) costs to get inventory ready for sale. C) taxes paid on the purchase price. D) sales commission paid to salesperson when the inventory is sold.

D

Dole Company uses the periodic inventory system. At the end of the accounting period, ending inventory is $10,000 and beginning inventory is $5,000. Purchases for the period are $99,000. How many journal entries are necessary at the end of the accounting period? A) none B) one C) two D) three

D

Ending inventory for the year ended December 31, 2019, is understated by $23,000. How will this error affect net income for 2020? A) Net income will be understated by $46,000. B) Net income will be overstated by $46,000. C) Net income will be understated by $23,000. D) Net income will be overstated by $23,000.

D

Gross profit will be the: A) highest if LIFO is used and inventory costs are decreasing. B) lowest if LIFO is used and inventory costs are increasing. C) highest if FIFO is used and inventory costs are increasing. D) all of the above.

D

If ending inventory for the year ended December 31, 2019, is understated, this error will cause owners' equity to be: A) overstated at the end of 2019 and understated at the end of 2020. B) understated at the end of 2019 and overstated at the end of 2020. C) overstated at the end of 2019 and correctly stated at the end of 2020. D) understated at the end of 2019 and correctly stated at the end of 2020.

D

If ending inventory is overstated by $6,000, then: A) stockholders' equity is overstated by $6,000. B) cost of goods sold is understated by $6,000. C) gross profit is understated by $6,000. D) A and B.

D

If ending inventory is understated for Year 1, then in Year 2: A) cost of goods sold and gross profit will both be understated. B) cost of goods sold and gross profit will both be overstated. C) cost of goods sold will be overstated and gross profit will be understated. D) cost of goods sold will be understated and gross profit will be overstated.

D

On June 1, Neighbor Company purchased inventory on account with a cost of $3,000. The credit terms were 3/10, net 30. On June 2, Neighbor returned 50 percent of the inventory. Neighbor uses the perpetual inventory system. On June 8, Neighbor paid for the inventory. What journal entry did Neighbor Company prepare on June 8? A) debit Purchase Discount for $45, debit Cash for $1,455 and credit Accounts Payable for $1,500 B) debit Accounts Payable for $1,500 and credit Cash for $1,500 C) debit Accounts Payable for $1,500 credit Purchase Discount for $45 and credit Cash for $1,455 D) debit Accounts Payable for $1,500, credit Inventory for $45 and credit Cash for $1,455

D

On June 1, Nicholson Company purchased inventory on account with a cost of $1,600. Credit terms were 2/10, net 30. On June 2, Nicholson Company returned 50 percent of the inventory. Nicholson Company uses the perpetual inventory system. What journal entry did Nicholson Company prepare on June 2? A) debit Purchase Returns for $1,600 and credit Accounts Payable for $1,600 B) debit Cash for $1,600 and credit Accounts Payable for $1,600 C) debit Purchase Returns for $800 and credit Accounts Payable for $800 D) debit Accounts Payable for $800 and credit Inventory for $800

D

On May 1, Santelle Company purchased $700 of inventory on account with credit terms of 4/10, net 30. Santelle uses the perpetual inventory system. On May 2, the seller gave Santelle a $100 allowance due to a product defect. What journal entry did Santelle Company prepare on May 2? A) debit Accounts Payable for $100 and credit Purchase Returns and Allowances for $100 B) debit Accounts Payable for $100 and credit Purchase Discounts for $100 C) debit Cash for $100 and credit Accounts Payable for $100 D) debit Accounts Payable for $100 and credit Inventory for $100

D

The gross profit percentage is calculated as: A) cost of goods sold divided by net sales revenue. B) net sales revenue minus gross profit on sales. C) net sales revenue minus cost of goods sold. D) gross profit divided by net sales revenue.

D

The income tax saved by using LIFO instead of FIFO is equal to the ________ times the income tax rate. A) cost of the ending inventory B) retail price of the ending inventory C) cost of the beginning inventory D) LIFO Reserve

D

The inventory method used by a company affects: A) net income on the income statement. B) the income taxes to be paid. C) the ending inventory on the balance sheet. D) all of the above.

D

The journal entry to remove the beginning inventory under the periodic inventory system is: A) debit Purchases and credit Cost of Goods Sold. B) debit Purchases and credit Inventory. C) debit Inventory and credit Cost of Goods Sold. D) debit Cost of Goods Sold and credit Inventory.

D

There is an error in computing ending inventory in Year 1. Which statement is TRUE? A) The error will have no effect on Year 2 financial statements. B) After three years, the inventory error will counterbalance. C) Gross profit will continue to be incorrect until an adjusting entry is made. D) The total gross profit for Year 1 and Year 2 combined will be correct.

D

To determine the cost of ending inventory using the LIFO method: A) the latest purchase costs are used. B) the specific unit cost of the inventory is used. C) the average cost of the inventory is used. D) the beginning inventory and earliest purchase costs are used.

D

Under U.S. GAAP, inventories are reported on the balance sheet at: A) historical cost only. B) current replacement cost only. C) selling price. D) lower-of-cost-or-market.

D

Under the average-cost inventory method, to determine the average cost per unit: A) the cost of beginning inventory is divided by the number of units available. B) the cost of beginning inventory plus the cost of purchases is divided by the number of units sold. C) the cost of purchases for the period are divided by the number of units available. D) the cost of beginning inventory plus the cost of purchases is divided by the number of units available.

D

Under the periodic inventory system: A) the Inventory account is always up-to-date. B) the Purchases account is an asset account. C) an entry to credit Inventory must be made at the time a sale is recorded. D) an entry must be made at the end of the period to transfer Purchases to Cost of Goods Sold.

D

When comparing the FIFO and LIFO inventory methods: A) LIFO reports inventory at net realizable value. B) LIFO reports the most up-to-date inventory cost on the balance sheet. C) FIFO results in the most realistic net income figure. D) FIFO matches old inventory costs against revenue.

D

When comparing the results of LIFO and FIFO when inventory costs are decreasing: A) cost of goods sold will be lower using FIFO. B) ending inventory will be higher using FIFO. C) cost of goods sold will be higher using LIFO. D) ending inventory will be higher using LIFO.

D

When using FIFO for inventories, market value generally refers to ________ under U.S. GAAP and ________ under IFRS. A) current replacement cost; historical cost B) historical cost; net realizable value C) historical cost; current replacement cost D) net realizable value; net realizable value

D

Which is the CORRECT order for items to appear on the income statement? A) sales revenue, operating expenses, gross profit, net income B) sales revenue, gross profit, net income, operating expenses C) sales revenue, gross profit, cost of goods sold, operating expenses D) sales revenue, cost of goods sold, gross profit, operating expenses

D

Which of the following is a CORRECT statement about the lower-of-cost-or market rule when applied to inventories? A) Under U.S. GAAP, once inventory has been written down to market value, the write-downs can be reversed in future periods. B) Under U.S. GAAP, the lower-of-cost-or-market rule is optional. C) Currently, the lower-of-cost-or-market rules are the same for both U.S. GAAP and IFRS. D) Under IFRS, some lower-of-cost-or-market write-downs may be reversed.

D