S&C Inc.has the following LIFO perpetual inventory records:

The current replacement cost of the ending inventory is $4,500.To apply the lower-of-cost-or-market rule,the journal entry would be:

Question

S&C Inc.has the following LIFO perpetual inventory records:

The current replacement cost of the ending inventory is $4,500.To apply the lower-of-cost-or-market rule,the journal entry would be:

Quizplus · Accepted Answer

The lower-of-cost-or-market rule states that if the replacement cost of inventory (market) is lower than its recorded cost, then the inventory should be written down to its market value. In this case, the replacement cost of the ending inventory is $4,500, but the cost recorded in the LIFO perpetual inventory records is $5,000. Therefore, the inventory should be written down to $4,500, resulting in a decrease of $500. This decrease should be recognized as an expense in the current period, using the following journal entry: Debit Cost of Goods Sold $500 and Credit Inventory $500. Therefore, the correct answer is C.

S&C Inc.has the Following LIFO Perpetual Inventory Records