Archer Corp. has the following LIFO perpetual inventory records:
The current replacement cost of the ending inventory is $3,800. To apply the lower-of-cost-or-market rule, the journal entry would be:
A) Debit Cost of Goods Sold $2,050, credit Inventory $2,050,
B) Debit Inventory $2,050, credit Cost of Goods Sold $2,050,
C) Debit Cost of Goods Sold $1,200, credit Inventory $1,200
D) Debit inventory $1,200, credit Cost of Goods Sold $1,200
A) Debit Cost of Goods Sold $2,050, credit Inventory $2,050,
Explanation: Inventory on hand Dec 31 - replacement cost = adjustment amount; credit Inventory to reduce balance.
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What will be an ideal response?
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