Target purchased pumpkin flavored food and beverages for sale to its customers in the Fall. As of January 15, it still has about $4,000,000 worth of unsold pumpkin products on its shelves. The market value of the products is zero. How is the accounting equation effected when Target realizes its unsold pumpkin products are worthless?

Question 16 options:

1)	Inventory and Cost of Sales will decrease by $4,000,000.
2)	There is no effect on the accounting equation because it already paid for the products.
3)	Equity and Assets will be reduced in the accounting records by $4,000,000.
4)	When it realizes that its pumpkin products are obsolete, it will record a liability for $4,000,000 and an expense for $4,000,000.