Answer: E) make no adjustments to the inventory account.
Your company has 500 units in inventory that were purchased for $12 each. These units have a current market price of $15 each. Your supplier has just announced a price increase to $16.50 that will go into effect at the beginning of next year. Management should:
A) adjust the cost of goods sold account for $750.
B) adjust the inventory account using the lower of the recent market values, which is $15.
C) adjust the inventory account using the cost, which is $12.00.
D) adjust the cost of goods sold account for $1,500.
E) make no adjustments to the inventory account.
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