A company's current inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?
A)Debit Merchandise Inventory $25,000;credit Cost of Goods Sold $25,000.
B)Debit Cost of Goods Sold $30,000;credit Merchandise Inventory $30,000.
C)Debit Cost of Goods Sold $5,000;credit Merchandise Inventory $5,000.
D)Debit Loss on Inventory $5,000;credit Cost of Goods Sold $5,000.
E)Debit Merchandise Inventory $30,000;credit Cost of Goods Sold $25,000.

Question

Quizplus · Accepted Answer

The company needs to write down the inventory to its market value, which is $5 per unit. The loss is $1 per unit for 5,000 units, totaling $5,000. Therefore, the entry is to debit Cost of Goods Sold and credit Merchandise Inventory for $5,000.

A Company's Current Inventory Consists of 5,000 Units Purchased at $6