Smart Company rarely had to write down inventory. In the past, when inventory write$-$downs were necessary, the company debited cost of goods sold. Recently, write$-$downs have become more common and Smart is concerned about the distortion of its gross profit percentage. What alternative is available under GAAP?

Multiple choice question.

Smart Company could record a non$-$operating loss.

Smart Company could debit a separate loss account and include it as an operating expense.

Smart Company could record the loss as extraordinary because it rarely occurred.