1. Cherry Falls Inc. (CFI) sells RedSoxbaseball hats. CFI uses theperpetualmethod of accounting for inventory, and the gross method for recording sales discounts. CFI preparesmonthlyfinancial statements. Instead of the previous entry, assume this circumstance. CFI is preparing financial statements at 9/30. The inventory cost at September 30 is $1,200. Because the RedSoxare NOT in the World Series, determines that the Net Realizable Value of the hats is only $1,000. What is the effect on net income for this transaction? Note: if the event would NOT cause recognition of revenue or expense then select A:No effect on net income.

   A.	No effect on net income
   B.	Decrease net income
   C.	Increase net income