Sandra Company had 200 units of inventory on hand at the end of the year.These w

Question

Sandra Company had 200 units of inventory on hand at the end of the year.These were recorded at a cost of 12 dollars each using the last-in,first out(LIFO) method.The current replacement cost is 10dollars per unit.The selling price charged by Sandra Company for each finished product is 15 dollars. In order to record the adjusting entry needed under the lower-of-cost-or market rule,the Merchandise Inventory will be :

A)debited by 400dollars

B)credited by 2,000 dollars

C)debited by 2,000 dollars

D)credited by 400 dollars

Explanation / Answer

Cost = 12 dollars

Market value = 15 or 10 so 10 dollars

Adjusting entry :

so answre is D)credited by 400 dollars

Date accounts & explanation debit credit Cost of goods sold (200*2) 400   Merchandise inventory 400 (To record adjusting entry)

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