After applying the lower-of-cost-or-market (LCM) method, if a company writes-down its inventory, the effect on the accounting equation is:

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After applying the lower-of-cost-or-market (LCM) method, if a company writes-down its inventory, the effect on the accounting equation is:

a. a decrease to total assets and an increase to total liabilities.
b. a increase to total assets and an increase to total liabilities.
c. a decrease to total assets and a decrease to total stockholders’ equity.
d. an increase to total assets and a decrease to total stockholders’ equity.
e. a decrease to total liabilities and a decrease to total stockholders’ equity.
f. a decrease to total assets and a decrease to total liabilities.

Answer: c. a decrease to total assets and a decrease to total stockholders’ equity.

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