The Standard Company's analysis of its inventory revealed that the net realizable value is $340,000 whereas the current amount in the Inventory account shows $365,000. What is the effect of the required writedown of inventory on the year-end financial statements?

Group of answer choices

Pretax income will increase by $25,000 and Inventory will decrease by $25,000.

Standard Company will owe its inventory suppliers $25,000 less.

The inventory on the balance sheet will be lower by $25,000 and Cost of Goods Sold on the income statement will increase by $25,000.

There will be no effect on the statements as the inventory's net realizable value may increase during the next year.

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