If the value of the merchandise inventory decreases by 50 % because of flood or fire, what will happen in the recording process?

Select one:

These inventory items will be kept in the "merchandise inventory" account. The "provision for loss on inventories" will not be recorded.

These inventory items will be reclassified in the "other inventories" account. The "provision for loss on inventories" account will be credited.

These inventory items will be reclassified in the "other inventories" account. The "provision for loss on inventories" account will be debited.

These inventory items will be kept in the "merchandise inventory" account. The "provision for loss on inventories" account will be credited.